Japan Plans Handouts Over $2,750 in Record Stimulus Package
Japan Plans 300,000 Yen Handouts in Biggest Stimulus Package
(Bloomberg) -- Japan is planning to distribute 300,000 yen ($2,768) to virus-hit households as part of its biggest-ever stimulus package, according to the ruling party.
Prime Minister Shinzo Abe approved the value of the handouts ahead of the announcement of the package next week, said Fumio Kishida, policy head of the Liberal Democratic Party, after meeting Abe and Finance Minister Taro Aso on Friday.
The details emerged three days after the party unveiled 60 trillion yen ($554 billion) worth of measures aimed at supporting households and businesses battered by the fallout from the coronavirus pandemic. Japan is following the U.S. in providing cash handouts in response to the pandemic to help people in need of a lifeline to pay the bills and to support spending.
Criticism over the ineffectiveness of handouts in the past and growing concern over the loss of work in certain sectors of the economy are prompting the government to go far beyond the minimum 12,000 yen sum provided during the global financial crisis.
The full details of the cash handouts were yet to be hammered out, Kishida said. As payments will be targeted for those most in need this time, the focus going ahead will be on the criteria the government uses to decide who gets the money.
Sales Tax Stays
Akira Amari, the party’s tax policy head, poured cold water on the idea of lowering the sales tax. He said he didn’t think the rate should be lowered or that taxes should be raised to fund economic measures in the near future.
“We have various tools to stimulate the economy and I don’t think it’s appropriate to cut a foundation of social stability,” Amari told reporters, referring to the fact that sales tax revenue plays a key role funding social services. “It’s extremely difficult to increase or decrease the sales tax rate.”
The party has approved some emergency tax changes to be part of the package, he added.
Temporarily reducing the tax rate or even not applying it for a period has been floated as a stimulus idea. The LDP on Tuesday characterized its measures to hand out as much as 10 trillion yen to the public as equivalent to reducing the sales tax by 5 percentage points, a move that already suggested resistance to the idea of actually cutting the tax.
Amari also gave a green light for the government to issue debt-covering bonds and put fiscal consolidation efforts on hold for now. He emphasized the importance of combining taxation, fiscal and monetary tools to ensure a V-shaped economic recovery once the virus spread gets contained.
Grants worth 1 trillion yen for regional governments as the virus spreads across the nation are also under consideration, according to Kishida.
The government is looking for ways to distribute the cash handouts quickly and will also take into account that foreign nationals living in Japan have been given handouts in the past, chief government spokesman Yoshihide Suga said at a separate briefing.
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