TOKYO - Japanese Prime Minister Shinzo Abe promised on Monday an unprecedented economic stimulus package, equivalent to 20 percent of economic output, as his government pledged to take "all measures" to combat the deepening rains of the coronavirus.
The package, which will be confirmed by the Cabinet on Tuesday, will amount to 108 trillion yen ($989 billion), well above the amount collected after the 2009 financial crisis of 56 trillion yen, with a budget of 15 trillion yen.
"We have decided to maintain an unprecedented economic package worth 108 trillion yen, or 20 percent of GDP, after the enormous economic damage caused by the new coronavirus," Abe told reporters after meeting with senior legislators from the ruling party.
Abe stopped detailing, but the amount may include previous economic measures worth 26 trillion yen taken late last year to address the risks associated with the U.S.-China trade war.
However, the package was much larger than market participants expected, giving a sense of security to people facing a drop in income and staying indoors, according to some analysts.
"There may be a limited impact on stimulating consumption as many people refrain from buying," said Masaki Kuwahara, chief economist at Nomura Securities. "But this could prevent a second round of impact on the economy.
The package includes cash payments worth more than 6 trillion yen to struggling households and small and medium-size businesses, Abe said, noting the extensive damage caused by the virus, which is fueling recession fears.
Abe said he would declare a state of emergency on Tuesday.
To protect jobs, the government will also develop a package of measures that will allow small and medium businesses to borrow from zero percent of private financial institutions, Abe said.
It will also give struggling businesses a grace period to pay taxes and social security charges totaling 26 trillion yen to help them continue operations, he added.
"THE BIGGEST CRISIS SINCE THE WII".
Worldwide cases of the new coronavirus passed 1 million and more than 64,000 people died. Japan has been spared the explosive wave seen in Europe, the United States and elsewhere: as of Monday there had been some 3,500 cases and 85 deaths, but new infections are on the rise, especially in Tokyo itself.
As a measure of how seriously the Government was taking the situation, the draft document prepared by the Government described the pandemic as "the greatest crisis" that the world economy had faced since the Second World War.
The document states that the Government and the Bank of Japan should share the sense of crisis and work closely with each other.
The draft package also aims to increase production of Fujifilm Holding Corp.'s Avigan flu medicine during the current fiscal year so that it can be used to treat two million people.
To finance the package, the government will issue deficit-covered bonds that will further complicate the situation with the world's heaviest public debt, which is more than twice the size of the country's $5 trillion economy.
Sources told Reuters last week that Japan will increase its government bond issuance by 16 trillion yen to about 145 trillion yen, which will be sold in the market this fiscal year, marking the first increase in annual bond issuance in four years. (Letter from Tetsushi Kajimoto; Written by Kenneth Maxwell and Nick McPhee)