Japan government considers further pandemic relief of more than ¥100 trillion, report says

The government is considering a fresh relief package worth over ¥100 trillion that will consist mostly of financial aid programs for companies hit by the coronavirus pandemic, the Nikkei newspaper said on Monday.

The package, to be funded by a second extra budget planned for fiscal 2020, which began in April, would follow a record ¥117 trillion spending plan deployed last month to cushion the economic blow from the pandemic.

The move would be the latest effort to support an economy headed for its deepest slump in postwar history as the pandemic crushes businesses and consumer spending.

Japan ended emergency measures for most regions and was set to lift them in the remaining places, including the Tokyo metropolitan area, later Monday.

“Japan’s economy is in an extremely severe state and we need to pull out of this situation as soon as we can,” Finance Minister Taro Aso told reporters on Friday.

The second extra budget, worth ¥100 trillion, will include ¥60 trillion for expanding loan programs that state-affiliated and private financial institutions offer to firms hit by the virus, the paper said.

Another ¥27 trillion will be set aside for other financial aid programs, including ¥15 trillion for a new program to inject capital into ailing firms, it said.

The government is expected to approve the budget, which will also include subsidies to help companies pay rent and wages as they close businesses, at a Cabinet meeting on Wednesday.

The economy slipped into recession in the last quarter, and analysts expect another 22 percent contraction in April-June due to the hit from the health crisis.

The deepening pain is forcing the government to add to the nation’s huge debt pile, which is already twice the size of its economy, to pay for big spending plans.

The Bank of Japan expanded monetary stimulus for the second straight month in April and pledged to buy as many bonds as needed to keep borrowing costs at zero.

“Our policy framework can keep long-term interest rates from rising even if the government increases bond issuance,” BOJ Gov. Haruhiko Kuroda told reporters on Friday.

Under a policy dubbed “yield curve control,” the BOJ targets short-term interest rates at minus 0.1 percent and pledges to guide 10-year government bond yields around 0 percent.

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