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ECONOMY

Editorial: Make sure economic support arrives quickly and reliably

  • April 9, 2020
  • , The Japan News , 3:05 p.m.
  • English Press

How quickly and surely can the benefits of the largest economic package in history be delivered to the people? A mountain of related problems has to be solved as soon as possible.

 

In response to the spread of the new coronavirus, the government has compiled an economic package worth ¥108 trillion. The figure is 20% of Japan’s gross domestic product (GDP), far higher than the economic stimulus package announced after the collapse of U.S. investment bank Lehman Brothers in 2008.

 

It is reasonable to implement a wide range of measures to support people or company whose revenues have declined sharply due to a sudden drop in demand over the spread of infections.

 

However, the measures are complicated and varied, with different systems being used. How many people know the exact details of the measures? Can they be carried out smoothly? It is hard to eliminate anxiety.

 

The government should sincerely listen to the voices of the people, identify problems and take appropriate measures.

 

The main focus of the package is cash payments to households and small and midsize companies.

 

The government will provide ¥300,000 each to households whose incomes have declined. Many people are worried about how to cover their living expenses. It is significant that households are supported by cash provisions.

 

Many people are not sure where the line has been drawn between people who are eligible for the cash payments and those who are not.

 

The system will apply to households that become exempt from residential tax due to a decrease in income. Households will be eligible if their income has dropped by more than half and has also fallen to less than double the level for exemption from residential tax. This calculation is based on the assumption that their income for any one month from February to June will continue for one year.

 

For a family of four consisting of a husband with outside income, a full-time housewife and two children to be eligible for an exemption from residential tax, they must meet the benchmark of an annual income of ¥2.55 million or less. A single-person household is eligible with an annual income of ¥1 million or less.

 

Families and income patterns vary. It is likely that there are many people who are not sure whether they are eligible or not. Municipalities will serve as the reception counters for people to apply for the cash benefits, but it is not clear at present which department will handle consultations with residents.

 

The central government should consult with local governments as soon as possible and prepare consultation services for the people.

 

Once the cash payment system is in place, there will be a flood of applications at reception counters. Crowding would increase the risk of infections spreading.

 

The government has said that it plans to introduce online applications. The cash payment system should be developed without delay.

 

A loss of income will be confirmed based on households’ own claims, using their pay stubs and other documents. It is important to prevent illicit receipt of the cash benefits, but it is hoped that necessary procedures can be simplified as much as possible by focusing on how fast payments can be made.

 

The government has said it plans to provide the cash benefits by the end of May at the earliest, but this is too slow. The government is urged to come up with a way to pay cash as soon as possible by, for example, cooperating with private insurers because they are well versed in the clerical work of paying benefits.

 

Some members of the ruling and opposition parties argue that the government can provide cash benefits more promptly if all households are made eligible across the board. The ruling and opposition camps should have deeper discussions on the appropriateness of this approach during deliberations on the supplementary budget for the current fiscal year.

 

Cash benefits to businesses have been set at a maximum of ¥2 million for small and midsize companies and ¥1 million for sole proprietors, including freelancers, on condition that their sales decline by more than 50% from the previous year.

 

Business operators will surely feel anxious if they borrow money when the future is uncertain. Cash benefits to businesses is an unusual measure, but a certain effect can be expected.

 

However, there are also concerns about how fast these payments can be made. Details about application forms and which offices will be in charge have not yet been decided. An online application system will also be implemented shortly. To ensure smooth implementation of this measure, it is essential to work out the details of this framework as soon as possible.

 

A special system to provide loans with effectively no burden of interest or collateral through government-affiliated financial institutions — which has been introduced as part of the government’s emergency measures compiled last month — has already received many applicants. These institutions are reportedly overwhelmed with the procedures.

 

The stipulation in the latest economic package that private financial institutions can also extend similar loans is an appropriate step.

 

Private financial institutions play an important role in helping businesses secure enough funds and preventing them from going bankrupt. It is hoped that they will take flexible steps, such as giving borrowers a grace period for the repayment of their existing loans.

 

The package also includes extending businesses a grace period for the payment of a wide range of taxes, such as consumption tax and corporate tax, as well as reducing or exempting them from fixed asset tax.

 

Giving companies such a grace period for the payment of taxes is effective in helping them operate for the time being, but simply carrying over these payments means that they will face a heavier burden the following year. Flexible measures are called for, such as allowing them to pay taxes over multiple years.

 

If infections with the virus continue to spread and requests for people to refrain from unnecessary and nonurgent outings or attending events are prolonged, it is expected that providing cash benefits only once will not be enough. The government should not hesitate to take additional measures when necessary.

 

In terms of providing cash benefits, the government can refer to similar examples overseas. Britain, for example, reportedly uses tax data to identify people eligible for cash payments and notify them.

 

In Japan, it is difficult to use individual tax data because consent is required. Is there any room for improving the cash payment measure, such as taking advantage of the My Number system as it is used for tax payment procedures? This will become an issue to examine in the future.

 

— The original Japanese article appeared in The Yomiuri Shimbun on April 9, 2020.

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