Japan eyes fresh stimulus plan worth over US$929b to battle COVID-19

TOKYO: Japan is considering a fresh stimulus package worth over US$929 billion that will consist mostly of financial aid programmes for companies hit by the coronavirus pandemic, the Nikkei newspaper said on Monday (May 25).

The package, to be funded by a second extra budget for the current fiscal year beginning in April, would follow a record US$1.1 trillion spending plan deployed last month to cushion the economic blow from the pandemic.

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

Japan ended state of emergency measures for most regions and plans to hold a panel discussion on Monday to decide whether to lift them in remaining places, including the Tokyo metropolitan area.

"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 yen (US$929.45 billion), will include 60 trillion yen for expanding loan programmes that state-affiliated and private financial institutions offer to firms hit by virus, the paper said.

Another 27 trillion yen will be set aside for other financial aid programmes, including 15 trillion yen for a new programme 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.

Japan's economy slipped into recession in the last quarter, and analysts expect another 22 per cent contraction in April-June due to the hit from the health crisis.

The deepening pain from the pandemic is forcing the government to add to Japan'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 Governor Haruhiko Kuroda told reporters on Friday.

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

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