Japan needs another extra budget to help ailing economy, experts say

17-Oct-2020 Intellasia | JapanTimes | 6:02 AM Print This Post

The government needs to compile a third extra budget for the current fiscal year ending March to shore up an economy hammered by the COVID-19 pandemic, economists said in a poll.

Nearly three quarters of economists polled said the government should spend up to JPY 10 trillion ($94.95 billion) under the extra budget to help the world’s third-largest economy recover after record contraction in the second quarter.

The rest said the government should spend even more.

“Companies are suffering from the heavy burden of social distancing policies to prevent the spread of the virus, which have hit their profit,” said Harumi Taguchi, principal economist at IHS Markit.

“There’s a chance the government will consider another budget as money to fund current subsidies and other relief measures may run out.”

A median estimate of 39 economists showed Japan’s economy expanded at an annualised 15.1 percent in July-September after contracting 28.1 percent in the preceding three-month period.

Those polled expect the economy to contract by a record 6.0 percent in the current fiscal year, and rebound 3.4 percent the following year. The projections were unchanged from a previous poll in September.

About 76 percent of respondents to the October 7-15 poll said the government should launch a third extra budget to cushion the blow from COVID-19.

Among those respondents, 11 said the size of the extra budget should be JPY 5 trillion to JPY 10 trillion, seven said under JPY 5 trillion, and the remainder said over JPY 10 trillion.

Japan has already announced JPY 230 trillion ($2.2 trillion) across two stimulus packages, including cash payments to households and small business loans.

Ruling-party lawmakers have likewise called for another stimulus package funded by a third extra budget.

Local media have reported prime minister Yoshihide Suga plans to order his government to compile extra stimulus measures as early as November, a move that would highlight his resolve to return growth to levels seen before the health crisis.

The poll also showed 90 percent of economists agreed with Suga that more regional banks must consolidate to survive the impact of a dwindling population as well as narrowing profit margins brought about by ultralow interest rates.

A firm majority of economists said small and midsized firms should also consolidate more to boost productivity.

“There are so many regional banks in Japan including those that won’t be able to withstand such severe competition alone,” said Hiroaki Mutou, assistant general manager at Sumitomo Life Insurance Co’s investment planning division.

Economists expect core consumer prices, which exclude volatile fresh food but include energy costs, to fall 0.4 percent this fiscal year before rising 0.2 percent the following year, the poll showed.



Category: Japan

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