The government should strengthen its safety net to prevent the spread of the novel coronavirus from causing an economic crisis.
Prime Minister Shinzo Abe instructed the government to compile a second supplementary budget proposal that includes additional economic stimulus measures.
The first supplementary budget was passed just at the end of April, but the impact on businesses and households has become even more serious since then. It is reasonable to take additional measures in rapid succession to support the economy. It is important to examine whether there are any flaws in the measures taken so far, and to supplement the budget appropriately.
The worsening of business conditions is not limited to small and medium-sized businesses, but has also been noticeable at large corporations. In particular, important industries such as airlines and railways, which are essential parts of transportation infrastructure, and automobile manufacturers, which have a wide range of subcontractors, are in trouble.
It is necessary to avoid a situation in which Japan’s industrial base is shaken by the spread of an infectious disease — a factor that is difficult to control. It can be said that the nation has reached a stage where the government should pay more attention to the management of large companies while expanding support for small and medium-sized businesses.
At a press conference, Abe expressed his intention to implement capital reinforcement measures that would also target large companies. It is likely that government-affiliated financial institutions will purchase preferred shares of companies to boost their capital.
A higher level of equity capital will stabilize their financial bases and provide a tailwind for raising funds through loans and corporate bonds. This is expected to have the effect of preventing bankruptcies. It is understandable that the government aims to establish a safety net in preparation for a prolonged impact.
The challenge is the selection of companies to be covered. During the financial crisis, public funds were injected into banks. Later, capital was also injected into Japan Airlines Co., which went bankrupt, and Tokyo Electric Power Company Holdings Inc., which was saddled with massive compensation obligations following the nuclear accident.
It is necessary to narrow the list of companies down to those that are essential for maintaining the Japanese economy, while taking past cases into account. In the case of small and medium-sized businesses, a certain line is required to be drawn, such as having technologies that cannot be replaced.
Public benefit programs to prevent unemployment must also be improved as soon as possible.
Abe said that the government plans to raise the maximum amount of employment adjustment subsidies paid to companies that put their employees on leave instead of discharging them from ¥8,330 a day to ¥15,000 as an exceptional measure.
The government’s intention to increase the benefit amount is understandable, but the biggest problem is that only a few companies are taking advantage of the program because it is not easy to use.
In addition to the cumbersome procedures, the subsidies are paid after companies provide leave benefits by themselves, so they are not useful for small and medium-sized companies with little cash on hand. The government should recognize the need to drastically review the program.
The government says it will establish a system under which employees who are on leave can apply for and receive benefits directly. The government is encouraged to devise ways so that many people can benefit.
— The original Japanese article appeared in The Yomiuri Shimbun on May 15, 2020.