On Monday, the Japanese government, which had earlier planned on releasing a ¥108.2 trillion ($1 trillion) stimulus package, was ready to boost that package to a record amount of ¥117.1 trillion ($1.1 trillion).

As the coronavirus pandemic continues to threaten the world’s third largest economy, the record stimulus is intended to cushion the economy, as well as expand cash payouts to its citizens as Japan falls further into recession.

According to the Japan COVID-19 coronavirus tracker, the country has recorded 11005 confirmed cases (9610 active), and 236 people have died so far as a result of the coronvirus.

The Japanese Prime Minister, Shinzo Abe, decided to increase the emergency stimulus package after a sudden shift in policy. The Japanese government now plans to provide a universal cash handout of ¥100,000 per individual in Japan, instead of the original plan, which was to give ¥300,000 to households whose income had been affected due to the virus outbreak.

Also included in the stimulus package are subsidies of up to ¥2 million for sole proprietors, including freelancers and medium-size companies, whose revenue has dropped significantly as a result of the pandemic.

On Monday, Japanese Finance Minister Taro Aso said:

“I understand the 100,000-yen payout scheme was decided to encourage every citizen to help with each other to overcome this crisis as one. The finance ministry will do the utmost to have this enacted quickly so that the payouts and other support will be delivered to the people as early as possible.”

Taro Aso, Japanese Finance Minister
Japanese Finance Minister, Taro Aso
Japanese Finance Minister, Taro Aso

Though many people believe the government payouts will end up in savings rather than spending (as is intended), some analysts say the expansion of the scheme might support private consumption, which accounts for more than half of the Japanese economy.

Ryutaro Kono, Chief Economist at BNP Paribas Securities, said Monday, “Recipients of the payouts include the rich and the people whose incomes are not suffering, so savings will also rise.”

Kono went on to say:

“Even considering more people will suffer an economic pain this time than during the 2009 financial crisis, the proportion of the payouts that will be spent is estimated at about 40 percent. As such, it would push up GDP only by 0.3 percentage point.”

Ryutaro Kono, Chief Economist at BNP Paribas Securities

In acting as it has, the Bank of Japan (BOJ) has joined other central banks in rolling out stimulus packages to stave off the risk of a global recession.

It should, however, be recalled that last month, the BOJ eased monetary policy by pledging to boost risky asset purchases and create a new loan scheme to pump more money into firms hits by slumping sales.

While the government plans to raise the market insurance of government bonds by ¥5.8 trillion to ¥152.8 trillion in the fiscal year to March 2021, the central bank will discuss further steps to ease corporate funding strains at this month’s rate review.

Prime minster Abe, who was criticised last week by some over his handling of the pandemic, apologised for confusion over a plan to start distributing coronavirus relief payments next month. Some believe that Abe’s switch to boost the stimulus package came after pressure from the Komeito party, the coalition partner of Abe’s ruling Liberal Democratic Party.