Japanese Prime Minister Shinzo Abe announced on April 6, 2020 a nearly $1 trillion stimulus package to protect the economy from the coronavirus pandemic. The $989 billion (108 trillion yen) package is double the relief unveiled during the 2008 financial crisis. It includes cash handouts, tax breaks, and zero-interest loans for businesses and families. Japan has recorded over 3,600 cases and 85 deaths from COVID-19, according to Johns Hopkins University.
The scale of the package
The stimulus amounts to roughly 20 percent of Japan’s gross domestic product. Abe described it as “an unprecedentedly massive scale of economic package worth 108 trillion yen, or 20 percent of GDP, following the immense damage to the economy from the novel coronavirus.” The government’s draft document referred to the pandemic as the “biggest crisis” the global economy has faced since World War Two.
The package may include 26 trillion yen in economic measures launched in 2019 to counter the US-China trade war. That earlier spending was aimed at softening the blow from Beijing’s trade practices and the resulting global uncertainty. The current stimulus dwarfs the 56 trillion yen package Japan deployed during the 2008 financial crisis.
Cash handouts and support for businesses
The government plans to give direct cash payments to households and small businesses. Tax breaks and zero-interest loans will help companies retain workers and cover operating costs. The goal is to prevent a wave of bankruptcies and layoffs as the pandemic shuts down large parts of the economy.
Abe’s administration has not specified the exact amount per person or per household. Officials said the details will be finalized in the coming weeks. The package also includes subsidies for companies that keep employees on payroll, similar to programs in the United States and Europe.
Rising cases and economic pressure
Japan’s coronavirus cases have been rising steadily. The country recorded over 3,600 infections and 85 deaths by April 6. Tokyo and six other prefectures are under a state of emergency. The government has urged people to stay home and businesses to close, but enforcement is limited.
The economic impact has been severe. Exports have fallen sharply. Tourism has collapsed. Manufacturing supply chains, many tied to China, have been disrupted. The International Monetary Fund has warned that the global economy will contract sharply in 2020.
Comparison with other countries
Japan is the latest major economy to roll out a massive stimulus. The United States approved a $2.2 trillion package in March. Germany announced a 750 billion euro program. China has also deployed fiscal and monetary measures, though Beijing has been criticized for underreporting case numbers and suppressing information about the outbreak’s origins.
The virus originated in Wuhan, China in late 2019. The Chinese Communist Party initially downplayed the threat, then imposed a strict lockdown in Hubei province. By April 2020, China’s official case count had stabilized, but many experts question the accuracy of its data.
Long-term risks and debt concerns
Japan’s public debt is already the highest in the developed world, at over 200 percent of GDP. The new stimulus will add to that burden. The Bank of Japan has kept interest rates near zero for years. Further borrowing may strain the country’s fiscal position, but officials argue that failing to act would be more costly.
Abe said the government will issue bonds to fund the package. He stressed that the priority is saving lives and livelihoods. “We decided to carry out an unprecedentedly massive scale of economic package,” he said.
The stimulus reflects a global consensus that governments must spend aggressively to prevent a depression. Japan’s experience with deflation and stagnation in the 1990s has made policymakers wary of doing too little. They are betting that a massive injection of cash will keep the economy afloat until the virus is contained.
The package is a gamble. If the pandemic persists, more spending may be needed. If it fades quickly, Japan will be left with even more debt. For now, the government is focused on the immediate crisis. The long-term consequences will be dealt with later.
