Japan’s Abe faces calls for more stimulus to stem virus impact

Bloomberg

Prime Minister Shinzo Abe still faces calls to put together another large-scale stimulus to shake off the impact of the coronavirus, despite a second round of emergency measures unveiled on March 10.
Most economists see the world’s third-largest economy falling into recession despite the two rounds of measures aimed at helping struggling businesses and workers. With the virus keeping schools shut, shoppers at home and tourists away, many analysts also see the economy shrinking over the span of 2020.
“Even the government knows it hasn’t done enough,” said Takeshi Minami, an economist at Norinchukin Research Institute. “People are getting increasingly concerned, and I think that in April, they will start looking for a big grandstanding moment to do something.”
The ruling Liberal Democratic Party’s tax chief, Akira Amari, has already called for an extra budget in the spring. Amari was among the first senior LDP officials to call for a stimulus package at the end of last year.
Etsuro Honda, an adviser to Abe, has said the economy will need at least 5 trillion yen in extra spending to get over the virus hit. On Wednesday, a group of junior LDP lawmakers even called for a package worth up to 30 trillion yen.
The measures announced so far by Abe will help companies encountering financial difficulties with interest-free loans and provide subsidies to some workers, including freelancers whose work has dried up. But there’s no real fresh spending as the steps draw on existing budgeted funds.
Abe’s reluctance to go bigger and sooner stems from the known unknown. Until the full scale of the outbreak and the economic damage is clearer, it’s difficult for policy makers to commit to larger sums.
Most of the spending from December’s 13.2 trillion yen stimulus package has yet to feed into the economy and more of it could be brought forward, too. There’s also little point throwing money at an economy until people are back at work, shoppers are in the streets, and factory production lines are humming again.
“The government is hoping it’ll be able to say the outbreak has peaked by early April,” said Mari Iwashita, chief market economist at Daiwa Securities Co. “There’s no point discussing the size of an extra budget at this point. If the outbreak hasn’t been contained by then, of course, the size of spending will have to be bigger.”
Content rather than size may matter more this time, said Harumi Taguchi, a Tokyo-based principal economist at IHS Markit.
“Any new stimulus won’t be heavy with public works this time. Instead, it’ll focus on support measures for affected people and businesses,” Taguchi said. “The size won’t have much of an impact on markets unless it’s really massive. We saw December’s package left little impression.”