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Editorial: Japan's state of emergency, stimulus package no answer to livelihood crisis

The Japanese government has issued a state of emergency declaration to Tokyo and six other prefectures amid a surge in the number of novel coronavirus cases in the country. It has also approved a record 108 trillion yen emergency stimulus package to cushion the economic impact of the pandemic.

    The emergency declaration urges citizens to thoroughly implement measures to prevent infections with the virus for about a month such as by refraining from nonessential outings and travel, raising fears that the country's economy could further be dampened. The government apparently aims to use the declaration with the introduction of the largest-ever economic package to ease public anxiety.

    At a press conference on April 7, Prime Minister Shinzo Abe stated, "The Japanese economy is facing the greatest crisis since the end of World War II." He then stressed that the scale of the latest stimulus package is equivalent to roughly 20% of the country's GDP and is one of the largest among economic measures hammered out by various countries. "With a strong sense of crisis, we will protect people's employment and livelihoods," he stated.

    That said, it has already been well over two months since concerns began to be raised over the repercussions of the coronavirus crisis on the Japanese economy. There are great numbers of people who are facing risks to their livelihoods as they struggle to make ends meet. If the prime minister was aware of the gravity of the situation, he should have mapped out support schemes much earlier. Just flaunting the financial volumes of the stimulus package does nothing to dispel public concerns.

    In particular, the policy of cash benefits for households in need is fraught with problems. Under the emergency package, the government intends to distribute 300,000 yen each to low-income households and others who have seen their income plummet amid the economic downturn triggered by the coronavirus crisis. Even though cash benefits are necessary, we have to say that the measure has been long overdue.

    The fiscal 2020 supplementary budget, which includes the 108 trillion yen stimulus package, is expected to be enacted in late April. This means that the cash allowance will not reach those in need until May or later, failing to serve as a safety net for them.

    Even the United States, which initially lagged behind in taking coronavirus infection control measures, is set to distribute cash to people in need by the end of April. The Japanese government should have responded to the coronavirus-triggered economic difficulty with the initial budget of this fiscal year, which was passed in the Diet in March. The government's rigid refusal to revise that budget led to the delayed response.

    In order to receive the cash benefits, potential recipients need to file applications with municipal governments. While the central government explains that this method allows for swift procedures by forgoing the need to confirm income requirements in advance, municipalities will still need to deal with an estimated 13 million households that are eligible for the benefits. If people flock to municipal office counters to apply for the money, paperwork would be thrown into chaos, possibly taking even a longer time before they can receive the allowance.

    Another problem is that the scope of those eligible for the cash benefits is quite limited. The government has set the criteria for recipients based on the income of households that are exempt from residential tax, just as it has done so for other financial support measures. As a result, even households whose annual income has nosedived from 7 million yen to 3.5 million yen may not be eligible for the latest cash benefits in some cases.

    The current economic slowdown is characterized by a sudden plunge in the salaries of people in affected industries after consumer demand for shopping, dining out, leisure and other activities vanished all at once. The government's economic package doesn't take into consideration the impact of those drastic changes on people's lives.

    The British government is compensating 80% of salaries for three months for employees of companies that have shut down temporarily due to the coronavirus pandemic. Japan, too, should follow suit, while looking aggressively into additional benefit provisions. It is also urged to review the scope of eligible households and simplify application procedures.

    Another priority issue is support for small- and medium-sized corporations that have weaker financial footing. With the effectuation of the state of emergency declaration, even more businesses in the restaurant, retail, leisure and other sectors are expected to close down, raising concerns for a possible rise in bankruptcies and unemployment. The economic package thus encompasses the creation of up to 2 million yen in benefits for smaller businesses, among other measures.

    Yet some companies may find themselves unable to sustain their businesses just with those benefits. The government should provide additional financial assistance as necessary.

    There is no guarantee that the state of emergency will be lifted in a single month. In the United States and Europe, the state of emergency has been in place over a prolonged period. Germany is providing three months' worth of subsidies to small businesses. Japan should also be prepared for a lengthy battle with the coronavirus, and must expend all possible means to compensate affected firms.

    The Tokyo Metropolitan Government is considering establishing funds to aid small and midsize firms that have complied with the capital's request to suspend their businesses. Other local bodies are encouraged to adopt similar steps in a proactive fashion.

    In order to provide sufficient livelihood assistance, it is imperative to secure ample financial resources. The government has newly issued 16 trillion yen worth of national bonds to finance the stimulus package, adding to the already 1 quadrillion yen-plus national debt.

    Even though the country is in a state of emergency, the government ought to minimize the debt to be shifted to future generations. In this respect, the government should hurry up and review public projects that are deemed nonessential and unnecessary.

    In spite of the numerous problems underlying the government's livelihood assistance, the emergency package is notably leaning toward economic stimulus efforts. This is apparently because the government aspires to minimize a possible blow caused by the coronavirus crisis to the Abenomics economic policy mix promoted by Prime Minister Abe's administration.

    Abe has vowed time and again to bring the Japanese economy to a V-shaped recovery, and measures worth nearly 2 trillion yen including coupons that can be used at restaurants and tourist facilities were incorporated into the economic stimulus package. These measures, however, would be more effective if they are presented in detail when the prospects for an end to the coronavirus crisis are clearly in sight.

    Protecting people's livelihoods and steady employment, which form the basis of the country's economy, is a major prerequisite for achieving an economic turnaround. The government is urged to focus all its efforts on providing meticulous support for people's lives.

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