The Japanese government has begun talks on an emergency economic package that could exceed ¥30tn ($275bn) as business calls for bolder steps to resurrect householding spending and offset a possible postponement of the Tokyo Olympics.
As business leaders and others submit their proposals for measures to protect the economy, lawmakers have asked Shinzo Abe, prime minister, to include cash payouts to households in the package of fiscal spending and tax relief measures. Those could also include a U-turn on a consumption tax increase that was only introduced a few months ago, said economic advisers to the government.
The full raft of measures is due to be finalised in April and will be crafted to shore up an economy that was already heading for technical recession even before the pandemic took hold. But analysts said the package was likely to expose the thin range of options available to a country already short of new stimulus ideas.
The discussions in Japan come after the Trump administration said it was considering sending cheques to Americans as part of a US stimulus package that could total as much as $1.2tn.
But on Thursday Taro Aso, Japan’s finance minister, expressed doubts on whether cash distributions would be effective, adding that the ministry was also not considering lowering its sales tax.
Kiichi Murashima, Japan economist at Citigroup, also said that an abolition or reduction of consumption tax would be extremely difficult for Mr Abe’s administration and could even prompt rating agencies to lower Japan’s sovereign debt rating.
If the government reduced the tax, said Mr Murashima, it would be effectively impossible for the foreseeable future to raise it again even after the coronavirus had been contained.
A panel of key ministers and the Bank of Japan governor will be given the task of compiling the stimulus package as the government begins hearings from Thursday with sectors that have been hit the most by the outbreak — including hotels, retailers and food services.
Under one of many proposals to be discussed by the panel, the government may consider subsidising hotels so empty rooms can be provided to office staff who need space to self-isolate and telework, according to two people familiar with the discussions.
The hotel industry has been hit hard as overseas visitors fell 58 per cent in February from a year earlier, according to the latest figures released on Thursday.
There is also growing alarm among business executives that consumer sentiment will be further dented as the likelihood increases for a postponement — or even a cancellation — of the Tokyo 2020 Olympics, scheduled to begin in July.
“We have to do something to change the mindset of the people,” said a chief executive in the retail sector. “The entire consumer psychology will go down if the Olympics and Paralympics are delayed.”
Another proposal some companies have pushed for is the extension of a system of cashback reward points that was introduced last autumn to offset the effect of the increase in the consumption tax. The scheme, which effectively rebates the tax increase in some stores when paying with a card rather than cash, was originally designed to expire this June.
Other proposals to be considered by the government in coming days will include a package that would see bankers dispatched from across the financial sector to assist small and medium-sized companies as they wrestle with the inevitable cash crunch now expected to arise from an economy where people have been avoiding many social activities for weeks.