The Japanese government and ruling party are considering providing direct cash payments of at least ¥12,000 per resident as part of the measures to counteract the economic fallout from the spread of the coronavirus. This is according to a report in the Mainichi newspaper. The payments would be a component of the emergency economic measures being considered for implementation in April.
Direct Cash Payments
In 2009, in the aftermath of the Lehman Shock (Great Financial Crisis) of 2008, the government made one-time fixed-amount benefits to people equal to about ¥12,000. People under 18 and over 65 received payments of ¥20,000 each, with a total of about ¥2 trillion being handed out. However, in 2009, many people did not end up spending these payments, instead putting them in their savings accounts.
This time around, a greater amount is being considered, with the hopes that it will spur consumption and help grease the wheels of a V-shaped recovery. Prime Minister Abe said at a general meeting of the party on Wednesday, March 17th, that the government needs to implement “drastic, powerful, and unprecedented policies” to jumpstart the economy.
Some members of the LDP have called for cash payments to be made only to families with children, who are thought to be especially hard hit by school closures. However, this would significantly limit the scope and effect of cash payments, since, for example, the elderly would be excluded.
For this reason, both the government and ruling party are considering cash payments in an amount that will be broadly and immediately effective in spurring consumption.
The total amount of all new emergency economic measures, centered on cash payments, is expected to exceed the ¥13.2 trillion fiscal package put in place at the end of 2019. A fiscal stimulus package of at least ¥15 trillion is apparently being considered.
Possible Temporary Consumption Tax Cut
Members of both the LDP and opposition parties have called for a temporary cut to the consumption tax, which was increased from 8% t o10% in October 2019.
However, some members of the LDP have said that their concerns include the difficulty of raising the rate again after a temporary cut and diminishing the intended effect of last year’s tax increase.
Source: Mainichi newspaper, March 18, 2020 (in Japanese)
Lead photo: Takeshita shopping street, Harajuku, iStock