Japan to spend over ¥15 trillion on virus-hit economy
TOKYO: Japanese Prime Minister Shinzo Abe’s pledge of “huge” stimulus will involve spending of at least ¥15 trillion (RM605 billion) financed in part by deficit-covering bonds, sources say, joining global efforts to cushion the economic blow from the coronavirus pandemic.
While the amount of debt issuance is likely be modest, it will put considerable market focus on Japan’s dire fiscal position – at a time the market rout caused by the outbreak is prodding investors to dump even safe-haven assets like government bonds in favour of cash.
“We need to come up with big, powerful economic and fiscal measures that meet the enormous magnitude of the hit from the coronavirus outbreak,” Abe told parliament yesterday.
“Depending on the situation, we’ll take measures that exceed in scale those taken after the Lehman crisis,” he said.
The Bank of Japan (BOJ), too, stands ready to expand stimulus for the second straight month in April if the pandemic leads to cuts in jobs and capital expenditure big enough to derail prospects of an economic recovery, sources familiar with its thinking say.
“The key would be whether Japan’s economy can manage to bounce back, as the BOJ now projects, after a temporary slump caused by the coronavirus outbreak,“one of the sources said on condition of anonymity due to the sensitivity of the matter.
“If further monetary steps are necessary, the BOJ is ready to act. In doing so, it will take into account the expected impact from the government’s stimulus package,“the source said.
The BOJ next meets for a rate review on April 27-28.
The government is working on a package of measures to combat the widening economic fallout from the coronavirus that will involve direct fiscal spending exceeding ¥15 trillion, several government and ruling party lawmakers with direct knowledge of the issue said.
Including loans and other steps that does not include direct spending, the size of the package will exceed ¥30 trillion, the officials said. – Reuters