TOKYO (Reuters) – Japan must maintain an appropriate “policy mix” by adopting strong fiscal spending to go with the Bank of Japan’s powerful monetary easing to protect the economy and jobs from the coronavirus fallout, the ruling Liberal Democratic Party said.
The proposals, issued by the party’s key policy council, will provide the basis for stimulus measures to be funded by a second supplementary budget draft to be compiled on May 27.
The council made no mention of the size of the second extra budget, although several lawmakers called for 100 trillion yen ($929.28 billion) worth of measures.
“We expect more gradual recovery than V-shape. We must avoid a double dip by strengthening the safety net to protect lives, businesses and jobs,” Seiji Kihara, vice chairman of the council, told reporters. “We may face second and third waves of infection in the autumn, so we must boost budget reserves to prepare against it.”
Aside from proposing increased subsidies to help businesses pay their rent and their workers, and a boost in subsidies for students, the panel also called for more capital to be made available to companies of all sizes as the economy slips deeper into recession.
One of the five sub-panels of the council proposed 10 trillion yen ($93 billion) be made avaliable to inject capital or provide financing for ailing companies, both big and small, in a move that reflects policymakers mounting alarm over economic downturn.
The sub-panel urged coordination between the government and private sector to provide capital through various means, including subordinated loans, preferred share issues and debt-equity swaps.
In a related move, the Bank of Japan will hold an emergency policy meeting on Friday to set up a reward scheme for financial institutions that boost lending to small firms hit by the coronavirus pandemic.
(Reporting by Tetsushi Kajimoto; Editing by Andrew Heavens & Simon Cameron-Moore)