Japan to receive economic boost with stimulus package

Japan to receive economic boost with stimulus package
Source: Invest Asia

Japan has announced plans to cushion the economic impact caused by the novel coronavirus (SARS-CoV-2) by drawing up an emergency stimulus package.

The sum is said to be greater than the US$100 billion stimulus package provided after the 2008 recession in Japan, although no figures were immediately announced. As part of the stimulus package, cash handouts will reportedly be extended to struggling households.

Japan, however, has no plans to declare a national emergency amid rising coronavirus cases in the country, topping 2,000 on March 31, according to a Reuters calculation based on ministry data and media reports.

Hideo Kumano, chief economist at Dai-ichi Life Research Institute has recently stated: “I think the possibility of a lockdown of the Tokyo metropolitan area is rising.” A lockdown could shrink the nation’s economy by 1% or US$47 billion (5.1 trillion yen).

Downward trend continues

Japan’s economy is heading towards a recession as the coronavirus pandemic and the postponement of the Tokyo Olympics to July 2021 take their toll. Japan’s industrial growth moved at a much slower pace in February this year as compared to the output in January. Production is reportedly expected to continue to decline.

Economists say the shutdown in the global economy is directly affecting Japan’s exports and output, and the world’s third-largest economy by gross domestic product (GDP) will continue to plunge deeper in the coming months.

“Global economic activity is shut down, so a plunge in exports and output is inevitable. Japan’s economy will contract more deeply in April-June than in the first three months of this year, and may not bounce back quickly,” says Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

Olympics postponement preferred

Source: FT

Japan had hoped to boost investment flow into the economy with the Tokyo Olympics 2020 before it was postponed.

Experts, however, believe that a postponement is a better move than cancellation, despite the economic implications of the postponement. “The postponement is clearly better than a cancellation, and [in that regard] it is a lifesaver for Japan,” said Yasuhide Yajima, chief economist at NLI Research Institute, a unit of Japan’s largest life insurer, Nippon Life Insurance.

“Still, the decision will blow off the standard scenario for this year that had envisaged some recovery of the Japanese economy around the sporting event.”


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