TOKYO:
Japan on Tuesday announced a second package of measures worth about $4 billion in spending to cope with the fallout to the economy of the coronavirus outbreak, focusing on support for small and mid-sized firms.
The package, totalling 430.8 billion yen ($4.1 billion) in spending, shows how much pressure policymakers are under to bolster fragile growth and stem the risk of corporate bankruptcies, as event cancellations and a slump in tourism threaten to hit the broader economy hard.
To help fund the package, the government will tap the rest of this fiscal year’s budget reserve of about 270 billion yen, Prime Minister Shinzo Abe said.“I’ll carry out necessary and sufficient economic and fiscal management without hesitation or delay, while fully ascertaining economic moves and effects on the people’s livelihoods from now on as well,” Abe said at the end of a meeting of the government’s economic advisory council.
The move is likely to affect what the Bank of Japan decides at its March 18-19 policy review.
The central bank will aim to ensure that companies hit by the virus outbreak do not face a financial squeeze before the end of the current fiscal year in March, Reuters has reported.
Finance Minister Taro Aso said on Tuesday there was no need yet for a bigger extra budget, adding that the fallout from the outbreak so far had not reached the scale of the 2009 financial crisis.
“We need to ascertain the current situation,” Aso told reporters after a cabinet meeting. If was not yet clear if the government needed an extra budget, he said.
FINANCIAL SUPPORT
As well as support for businesses, the new package will fund improvements to medical facilities, ease the supply and demand of masks, promote working from home, and provide subsidies to working parents who must take leave because of closed schools.
Aso said financing will focus on small and tiny businesses in need of financing over the next two to three weeks.
The financial watchdog has urged credit associations and regional banks to hold hearings with small businesses about their financial situation, he added.
Japan will boost 1.6 trillion yen in special financing for small- and mid-size firms hit by the virus, Abe said, up from about 500 billion yen previously announced.
Reuters first reported the second package’s size earlier on Tuesday and the financing on Monday.
As part of the second package, Abe has said a government-affiliated lender would offer funds effectively at no interest and without collateral to small firms whose sales slumped amid the outbreak.
The virus has infected more than 111,000 people and killed more than 4,000 globally, with the accompanying economic disruption undermining Japan’s export-led economy.
The world’s third-largest economy shrank by the most since a 2014 sales tax hike in the quarter to December, intensifying fears of an economic downturn.
The outbreak comes at a critical time for Japan, shattering hopes of a gradual economic recovery fuelled by strong domestic demand just as it prepares to host the summer Olympic Games in July and August.
The epidemic has prompted heavy selling of riskier assets and a scramble into assets such as the yen, perceived as safe havens during times of financial distress.
Trump vows 'major' steps to aid US economy amid coronavirus rise
Meanwhile, President Donald Trump on March 9 said he will be taking "major" steps to gird the economy against the impact of the spreading coronavirus outbreak and will discuss a payroll tax cut with congressional Republicans on Tuesday.
"We'll be discussing a possible payroll tax cut or relief, substantial relief, very substantial relief, that's a big number," Trump told reporters.
He did not provide details but said a news conference will be held on Tuesday.
House of Representatives Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer, the top two Democrats in Congress, told reporters that any payroll tax cut should be limited to those affected by the virus.
They also said they are crafting new legislation, on the heels of $8.3 billion coronavirus funding enacted last week, that might be ready to be introduced this week.
Among proposals that could be included are ensuring water supplies are maintained for people even if they cannot pay their bills as a result of the crisis, expanded unemployment insurance, medical leave and providing food for children who rely on school nutrition programs if schools are shut.
Vice President Mike Pence said the administration was consulting Congress on providing paid sick leave to workers, an idea that Democrats already have been trying to advance.
The stepped-up response to the coronavirus came as the number of confirmed cases in the United States hit 605, according to Johns Hopkins University. Three additional deaths in Washington state, according to officials, brought the total nationwide to 25.
Earlier Monday, Johns Hopkins said that worldwide, there are 113,584 cases, with 3,996 deaths, the majority in China.
The Trump administration moves came as stock markets plunged and top health officials urged some people to avoid cruise ships, air travel and big public gatherings.
The administration was planning to huddle in coming days with executives of the banking, hospital and health insurance industries.
While an across-the-board payroll tax cut has been under discussion, top White House economic adviser Larry Kudlow and others have advocated specific tax credits, loans or direct subsidies to certain industries or hard-hit areas.
A payroll tax cut could encourage consumer spending and help households that might otherwise struggle to make rent and mortgage payments on time or pay medical bills if family members' work hours are reduced during the coronavirus outbreak.
Thirty-four U.S. states and the District of Columbia have reported to the U.S. Centers for Disease Control and Prevention (CDC) infections of the respiratory illness COVID-19 that can lead to pneumonia.