The world’s third-largest economy, Japan, is set to unveil a second $1 trillion coronavirus economic stimulus package, a move that seeks to keep businesses and households afloat amid the global COVID-19 pandemic.
The package will be used to offer financing help for struggling companies, subsidies to help firms pay rent, health care assistance, and support for local economies. Additionally, the package contains a $2.9 trillion in new government spending.
The spending will be funded by a second supplementary budget of $2.9 trillion that will be paid for with new bond issuances.
In April, the government approved the first stimulus package, worth $1 trillion, which was equal to 20% of Japan’s economic output – far more than the 11% percent of the U.S. stimulus package and the 5% of output for Germany’s package.
Bloomberg reports that Japan will boost its debt issuance by 55-60 trillion yen ($558 billion) to fund the second extra budget and other loans and investment in the new stimulus package. That will bring the total bond issuance this fiscal year to more than 200 trillion yen ($1.9 trillion).
This comes barely a week after official figures released indicated that Japan has entered into a technical recession following poor economic performances in the last quarter of 2019, and the first quarter of 2020. Japanese Cabinet Office said that the economy contracted 3.4% between January and March this year.
Read Also: Japan Slips into a Technical Recession
The Bank of Japan (BOJ) already lifted the ceiling on government bond purchases as the government ramped up spending. BOJ has also cut rates and will introduce lending to small businesses.
Analysts see gross domestic product shrinking by more than 20% this quarter, and the risk that recovery will be slow as exports, tourism, and business investment struggle to rebound.
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