Japan to roll out huge stimulus plan as pandemic pain deepens

Japanese leader Shinzo Abe says the stimulus plan to counter coronavirus will exceed the $525 billion package compiled after the 2008 global financial crisis. (AP)
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Updated 04 April 2020

Japan to roll out huge stimulus plan as pandemic pain deepens

  • The government is set to approve a supplementary budget on Tuesday to fund the package

TOKYO: Japanese Prime Minister Shinzo Abe said on Friday a stimulus package to combat the coronavirus pandemic will be rolled out next week, and target small firms and households hardest hit by social distancing policies that are affecting consumption.

The package will include spending on medical supplies, as well as cash payouts to small firms and households facing sharp falls in income, Abe said.

The government will also urge private financial institutions to join government-affiliated lenders in offering zero-interest rate loans to cash-strapped small and midsized firms, he said.

“We’ll compile the package next week,” Abe told Parliament.

“We’ll deliver in a short period of time a targeted, bold package” that will help the economy achieve a V-shaped recovery, he said.

A senior ruling party official said on Friday he has agreed with Abe to offer 300,000 yen ($2,800) in cash payments per household that suffers a certain degree of income falls from the pandemic.

The government is set to approve a supplementary budget on Tuesday to fund the package.

Supply chain disruptions, travel bans and social distancing policies triggered by the pandemic have hit Japan’s economy, which was already on the brink of recession.

Economy Minister Yasutoshi Nishimura said the government’s stimulus measures will be delivered in two stages.

The first package will focus on immediate steps to ease corporate funding strains and protect jobs. The second batch will focus on boosting demand, particularly for industries currently hit by social distancing policies such as tourism and event organizers, he told a news conference.

Abe has pledged to lay out a huge stimulus plan to combat the virus that will exceed the 57-trillion-yen ($525 billion) package compiled after the collapse of Lehman Brothers in 2008.

Sources said Japan will fund the package by boosting government bond issuance by $149 billion, adding to what is already the industrial world’s heaviest debt burden at more than twice the size of Japan’s $5 trillion economy.

Rating agency S&P affirmed Japan’s sovereign debt credit rating and kept the outlook positive on Friday, despite the government’s plan to boost spending to battle the economic fallout from the virus.

Analysts expect Japan’s economy, which shrank in the final quarter of last year, to suffer two more quarters of contraction as the pain from the pandemic deepens.

Hiroshi Ugai, chief economist at JPMorgan Securities Japan, expects the world’s third-largest economy to contract 3.1 percent this year. “The government’s planned economic stimulus package would help address immediate problems that could lead to declines in household and corporate income,” he said. “But it would not be enough to change the big picture for Japan’s economy.”

EU pledges to stay green in virus recovery

Updated 29 May 2020

EU pledges to stay green in virus recovery

  • To help economies from the 27-nation bloc bounce back as quick as possible

BRUSSELS: The European Commission pledged on Thursday to stay away from fossil-fueled projects in its coronavirus recovery strategy, and to stick to its target of making Europe the first climate neutral continent by the middle of the century, but environmental groups said they were unimpressed.

To weather the deep recession triggered by the pandemic, Commission President Ursula von der Leyen has proposed a €1.85 trillion ($2 trillion) package consisting of a revised long-term budget and a recovery fund, with 25 percent of the funding set aside for climate action.

To help economies from the 27-nation bloc bounce back as quick as possible, the EU’s executive arm wants to increase a €7.5-billion ($8.25 billion) fund presented earlier this year that was part of an investment plan aiming at making the continent more environmentally friendly.

Under the commission’s new plan, which requires the approval of member states, the mechanism will be expanded to €40 billion ($44 billion) and is expected to generate another €150 billion in public and private investment. The money is designed to help coal-dependent countries weather the costs of moving away from fossil fuels.

Environmental group WWF acknowledged the commission’s efforts but expressed fears the money could go to “harmful activities such as fossil fuels or building new airports and motorways.”

“It can’t be used to move from coal to coal,” Frans Timmermans, the commission executive vice president in charge the European Green Deal, responded on Thursday. “It is unthinkable that support will be given to go from coal to coal. That is how we are going to approach the issue. That’s the only way you can ensure you actually do not harm.”

Timmermans conceded, however, that projects involving fossil fuels could sometimes be necessary, especially the use of natural gas to help move away from coal.

The commission also wants to dedicate an extra €15 billion ($16.5 billion) to an agricultural fund supporting rural areas in their transition toward a greener model.

Von der Leyen, who took office last year, has made the fight against climate change the priority of her term. Timmermans insisted that her goal to make Europe the world’s first carbon-neutral continent by 2050 remained unchanged, confirming that upgraded targets for the 2030 horizon would be presented by September.

Reacting to the executive arm’s recovery plans, Greenpeace lashed out at a project it described as “contradictory at best and damaging at worst,” accusing the commission of sticking to a growth-driven mentality detrimental to the environment.

“The plan includes several eye-catching green `options,’ including home renovation schemes, taxes on single-use plastic waste and the revenues of digital giants like Google and Facebook. But it does not solve the problem of existing support for gas, oil, coal, and industrial farming — some of the main drivers of a mounting climate and environmental emergency,” Greenpeace said.

“The plan also fails to set strict social or green conditions on access to funding for polluters like airlines or carmakers.”

Timmermans said the EU would keep investing in the development of emission-free public transportation, and promoting clean private transport through the EU budget.