Japan proposes record stimulus package to fix ailing economy

“The package has more than enough content and scale to deliver a sense of security and hope to the people,” Prime Minister Fumio Kishida told reporters.

The proposal from Kishida was set for Cabinet approval later in the day but still needs parliamentary approval. Kishida has promised speedy action, and parliament is expected to convene next month.

The plan includes doling out 100,000 yen ($880) each in monetary assistance to those 18 years or younger, and aid for ailing businesses, Kishida and other politicians said.

Japan has never had a full lockdown during the pandemic and infections remained relatively low, with deaths related to COVID-19 at about 18,000 people. But the world’s third-largest economy was already stagnating before the pandemic hit.

Under the government’s “state of emergency,” some restaurants closed or limited their hours, and events and theatres restricted crowd size for social distancing. A shortage of computer chips and other auto parts produced in other Asian nations that had severe outbreaks and strict lockdowns has hurt production at Japan’s automakers, including Toyota Motor Corp., an economic mainstay.

The government has been studying restarting the “GoTo Travel” campaign of discounts at restaurants and stores, designed to encourage domestic travel. The campaign, which began last year, got discontinued when COVID cases started to surge.

Some critics have said the government approach amounts to “baramaki,” or “spreading out handouts,” which could prove ineffective in generating growth in the long run. Others say the proposed cash aid leaves out families without children and other poor.

The scale of the latest package will require Japan to sink deeper into debt by issuing bonds.

Yoshimasa Maruyama, the chief market economist at SMBC Nikko Securities, said the government needs to focus on getting spending going again, and the GoTo campaign could prove effective.

Japan’s economy contracted at an annual rate of 3% in the July-September period, largely because of weak consumer spending. Analysts say the economy is unlikely to rebound until next year.

Japan has also promised to earmark spending for vaccine research after facing criticism over being dependent on imports for coronavirus vaccines. It has so far approved vaccines from Pfizer, Moderna and AstraZeneca.

Kishida, who has promised “a new capitalism” for Japan, took office in September. His predecessor Yoshihide Suga stepped down after just a year in office, largely because of widespread public discontent about his inept response to the pandemic.