Japan’s Abe to likely add to record $555-B stimulus

PRIME MINISTER Shinzo Abe now has a record stimulus plan to help Japan’s households and businesses survive the coronavirus pandemic. History suggests there will be even more to come.

Japan’s ruling party has proposed a 60-trillion yen ($555-billion) package of measures worth more than 10% of gross domestic product, less than four months after its last economic stimulus. The prime minister had demanded a package bigger than the steps taken during the global financial crisis.

Mr. Abe reiterated his pledge to deliver Japan’s largest-ever economic stimulus on Wednesday following a central bank survey showing a steep drop in confidence among the country’s biggest companies.

Still, the repeated launching of spending measures after the collapse of Lehman Brothers in 2008 suggests Mr. Abe’s giant-sized first aid against the virus won’t be his last as Japan suffers extra pain from the fallout overseas.

The world has changed dramatically since Abe’s stimulus measures in December, with large swathes of some of the biggest economies put into lockdown to curb a rising death toll. That’s idled factories, closed shops and restaurants, caused widespread layoffs and limited consumer spending to all but the basic necessities.

Japan now joins aggressive support moves by the US, Germany, Italy and South Korea with its plan to unleash more spending.

Japan is at risk of a deepening recession due to the pandemic, the hangover from a sales tax hike and the postponement of the Olympic Games. In the three months starting in April, some analysts see the economy shrinking more than 10%, the biggest plunge since Mr. Abe took the helm in 2012. If the Tokyo metropolitan area, which accounts for a third of the economy, also heads into a strict lockdown, the damage would get a whole lot worse.

Mr. Abe will probably have to compile multiple sets of measures like the government did after the collapse of Lehman, said Koya Miyamae, a senior economist at SMBC Nikko Securities, Inc. “You can’t really stimulate the economy until it settles down again, so the chattering about more stimulus to come will inevitably continue.”

The scars of the Lehman shock run deep in Japan. While the nation had little to do with the subprime loans that helped trigger the turmoil in the global financial system and beyond, Japan’s economy ended up shrinking more than the US economy as a result. —