Extra budget to finance Kishida’s massive stimulus package clears Lower House

The Lower House approved a fiscal 2021 supplementary budget bill on Wednesday, which will sponsor Prime Minister Fumio Kishida’s record economic stimulus package.

The ¥35.98 trillion ($316.4 billion) extra budget bill will be deliberated in the Upper House with the ruling parties aiming to enact it during the ongoing extraordinary Diet session scheduled to end Tuesday.

The Kishida administration hopes to roll out economic and coronavirus measures quickly, as Japan’s economy is still weighed down by the impact of the pandemic.

The government plans to spend ¥55.7 trillion for the entire stimulus package, ¥31.5 trillion of which will be financed by the extra budget. The rest will be mainly covered by the fiscal 2022 budget, with a draft expected to be compiled this month.

Despite the present lull in new COVID-19 cases, ¥18.6 trillion of the supplementary budget is allocated to beef up the country’s pandemic defenses amid rising fears over the new omicron variant.

In addition to promoting a booster shot vaccination program and helping secure more beds and medical personnel in case of a rapid increase in patients, the government plans to facilitate research and development for COVID-19 vaccines and treatments.

The stimulus also aims to create a safety net for businesses and individuals, with policies such as handouts of up to ¥2.5 million in aid for struggling small and midsize firms, along with subsidies to allow companies to keep their employees.

With the record economic package, the Kishida administration hopes to resuscitate the economy and help solidify its political base, but one particular policy has drawn an inordinate amount of fire.

The government plans to offer ¥50,000 in vouchers and another ¥50,000 in cash to all children 18 and younger if their family’s highest-earner’s annual salary is below ¥9.6 million.

The ¥1.9 trillion program, which will be funded from both the supplementary budget and reserves from the main budget of this fiscal year, appears to be unpopular among many economists. Describing it as nothing more than pork-barrel politics crafted for the Oct. 31 Lower House election, some analysts say the policy’s purpose is unclear and the money will mainly end up going into savings and not stimulating the economy as planned.

The plan has also frustrated some local government and municipal leaders, since the burden of distributing ¥50,000 in coupons to all qualified children will fall mostly on them.

The Cabinet Secretariat has also stated that the administrative cost to the central government for distributing ¥50,000 in cash would be about ¥30 billion, while handing out the coupons would cost around ¥96.7 billion — over triple the amount. The Constitutional Democratic Party of Japan, the largest opposition party, said such massive administrative costs should be spent for other purposes, including helping those suffering from the economic fallout of the pandemic.

During Lower House budget committee sessions on Monday and Tuesday, Kishida said the central government will give local authorities the option to distribute the full ¥100,000 in cash within this month.

The government will issue new government bonds worth ¥22.05 trillion to cover the costs of the supplementary budget, adding onto Japan’s snowballing debt, which is already close to 250% of its gross domestic product.

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