The government must take swift steps to put a brake on the rapid economic downturn.
The fiscal 2020 budget has been enacted. Including measures to prop up the economy after the introduction of the consumption tax hike, the general account exceeds 102 trillion yen in total, making it a large-scale budget.
When the initial budget was compiled, it was not based on scenarios for dealing with an economic blow brought about by the spread of the new coronavirus. The government and the ruling parties should not be swayed by the past, but should take bold steps to implement additional measures to boost public spending.
The government will come up with a new economic stimulus package early in the new fiscal year, and to make it happen, submit a supplementary budget proposal to the Diet. The passage of the proposal is required as soon as possible.
Many small and midsize companies have been suffering sharp drops in sales as a result of people exercising self-restraint in going out, among other repercussions of the virus' spread, while many employees have been forced to take days off.
A two-tier approach such as the following is essential to tackle the situation. First, the government focuses on helping companies and workers in a quagmire. Second, when infections seem to be contained, it stimulates consumption and boosts the economy as soon as possible.
The government is considering offering cash benefits to households facing drastically reduced incomes, as part of measures to be taken for the time being. It is hoped that it will secure an amount of money that can give households a sense of reassurance.
By limiting the scope of households eligible for cash benefits, might there be a fear that more time may be required to draw a line between income levels and confirm income reductions? The system needs to be designed as quickly as possible.
There is also an existing system called the emergency small cash fund, which extends interest-free loans of up to 200,000 yen mainly to people on leave to cover their living expenses. It is important for the government to present the public with the kinds of options available and how they can be used in an easy-to-understand way.
If the coronavirus turmoil persists for a long time, it is feared that there will be many small and midsize companies that will face difficulties in continuing to run their businesses. An increase in unemployment must be prevented. In addition to measures to support their cash flow management, it is worth considering extending the grace period for the payment of consumption tax and corporate tax, as well as reducing or exempting them from fixed asset tax.
It is hoped that, after overcoming the crisis of the spread of infections, the government will switch to measures aimed at economic recovery. What is most important is to boost private consumption, which is the pillar of domestic demand. In order to enhance effectiveness in regard to this point, it would be ideal to provide support that also covers high-income earners who tend to spend large amounts of money.
Some have pointed out that under a program that provides cash across the board, benefits are more likely to be saved. It would be effective to provide time-limited gift vouchers that can be used for a wide range of purposes, such as shopping and dining out.
On the other hand, the consumption tax cut demanded by the opposition parties lays a heavy burden on retailers in such aspects as adjusting their cash registers among other challenges.
The government should examine the effectiveness and side effects of measures being considered and hammer out concrete steps.
In response to the increase in COVID-19 cases, the government and the ruling and opposition parties have set up a liaison council. The opposition parties demanded that the government secure masks among other sanitary goods and provide support for families raising young children. The government should reflect constructive proposals in its policies.
-- The original Japanese article appeared in The Yomiuri Shimbun on March 28, 2020.
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