• July 11, 2020

Japan Boosts Economy With $1 Trillion Against Coronavirus Effects. No Penalty For Disobeying Lockdown

Japanese Prime Minister Shinzo Abe on Tuesday declared a state of emergency to fight new coronavirus infections in major population centers and unveiled a stimulus package of $1 trillion which he described as among the world’s biggest largesse to soften the economic blow.

The state of emergency gives Japanese authorities more opportunity to make people stay at home and for businesses to close. The emergency gives governors the authority to call on people to stay at home and businesses to close.

There will be no penalties for ignoring the requests in most cases, enforcement will rely more on peer pressure and respect for authority. The government would not ask rail companies to reduce the number of trains in operation. Other essential infrastructure like mail and utilities would operate, as will ATMs and banks..

This will last through May 6. It is imposed in the capital, Tokyo, and six other prefectures — accounting for about 44 percent of Japan’s population. The Japanese emergency is not yet a national lockdown yet the country has lost 92 people to coronavirus, with about 4,000 confirmed cases as at today (April 7).

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The Prime Minster preached behavioural change to the people so that contacts and infections can be reduced.

The government stimulus package worth 108 trillion yen ($990 billion) equals 20 percent of Japan’s economic output. That exceeds the equivalent of 11 percent of US output for the stimulus package laid out by President Donald Trump and 5 percent of output for Germany’s package.

Japan has not been seriously affected by the outbreaks of the coronavirus as seen in other global hot spots until recently. A sudden surge in infections in Tokyo, Osaka and other areas led to strong calls for Abe to announce a state of emergency.

Infections in Tokyo more than doubled to about 1,200 in the past week, with more than 80 new ones reported on Tuesday, accounting for the highest number in the country. Authorities say the state of emergency may lead a formal lockdown as seen in other countries.

Tokyo Governor Yuriko Koike said the city is discussing with the central government as per what types of facilities to close or curtail business hours, while re-emphasising that there would be no restrictions on buying groceries and medicine.

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Minister of Agriculture, Forestry and Fisheries Taku Eto advised shoppers not to panic-buy.
He said they should buy only what they need when they need it as there is sufficient food supply and no suspension is planned at food factories.

However, the restrictions will add to the pains the virus is inflicting on the world’s third-largest economy which is apparently in recession. The consequential supply chain disruptions and travel bans will slow down factory output and consumption.

Metropolitan Tokyo alone accounts for about 20 percent of Japan’s overall gross domestic product.

Japan’s humongous debt equals twice its economic size – hence it would have to sell a record amount of additional bonds worth more than 18 trillion yen to fund the magnanimous package.

Surely, the largesse could ease the immediate damage from the pandemic but lawmakers are calling for bigger spending to avert bankruptcies and job losses.

Economic analysts says the economy will experience two more contractions thereby pressuring the government and central bank to up their game. The economy witnessed a contraction in the final quarter of last year

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Takahide Kiuchi, a former Bank of Japan board member who is now an economist at Nomura Research Institute said the government will probably compile another supplementary budget soon to stimulate the economy with even more spending.

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Femi Oshin

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