Last Updated 5/28/2020
In order to adequately adjust to the morphing landscape, it is crucial to stay informed on the latest developments affecting businesses and the general public. With the Japan COVID-19 Report, it is our goal to help you do just that. This will be regularly updated as new changes occur.
- Government approves second supplemental budget to help companies hit by the crisis
- Government lifts state of emergency declaration in Tokyo and Hokkaido
- Bank of Japan approves ¥30 trillion program to promote loans to small businesses
- Tokyo to ease restrictions from May 31
COVID-19 in Numbers:
Based off data available on the Ministry of Health, Labour and Welfare (MHLW) website, as of 12:00pm on May 28, Japan has:
- Conducted 281,293 PCR Tests;
- 16,683 positive cases;
- 867 deaths.
Based off data available on the Tokyo Metropolitan Government website for COVID-19, as of 8:00pm on May 27, Tokyo has:
- Conducted 66,425 PCR Tests;
- 5,180 positive cases;
- 296 deaths.
Now that the state of emergency has been lifted, the government will focus on providing economic and financial support for the many businesses, companies, households and individuals hit by the crisis. The political processes around the first supplemental budget were harshly criticised for being unclear. The stimulus package also saw its key measure replaced by one proposed by the LDP’s junior coalition partner, Komeito. The government just approved a second supplemental budget with support for small- and medium-sized enterprises and students. This time, the LDP and Komeito coordinated well and together put forward a framework to support SME rent payments. In other words, no setbacks expected this time.
The government is also getting back up speed in managing diplomacy. Tokyo is keen to get back on track in improving relations with China, and it has proposed a quick rescheduling of Chinese President Xi Jinping’s suspended visit. Prime Minister Abe highlighted that the objective is to showcase the two countries’ cooperation in responding to the pandemic.
The timing will probably be delicate. Japan has joined the European Union in asking for an independent probe into the WHO’s handling of the pandemic, a measure China opposes. On top of that, Japan has supported the inclusion of Taiwan as an observer in the World Health Assembly, which governs the WHO. China’s draft of new security legislation for Hong Kong is set to pass the National People’s Congress on Thursday, which will likely spark criticism from most western countries and Japan. The Japanese government faces a challenge in managing the tensions between its own foreign interests and its global governance agenda, but it is clear the Foreign Ministry is back in action.
Government approves second supplemental budget to help companies hit by the crisis
- The Government of Japan on Wednesday approved a second supplemental budget of ¥117.1 trillion ($1.09 trillion) for the fiscal year ending next March. This spending package aims to further help small- and medium-sized enterprises (SME) and people under major financial strain because of the virus.
- More than ¥60 trillion will go to financing for businesses through the Japan Finance Corporation and private lenders. ¥12 trillion worth of capital support will come in the form of state-backed loans from the Japan Investment Corporation, the Development Bank of Japan and the Japan Finance Corporation. Another ¥15 trillion will be added to an existing state reserve aimed at safeguarding struggling lenders.
- On May 8, the LDP and Komeito introduced a proposal to provide two-thirds of monthly rent up to ¥500,000 through bank loans for a period of six months. Those eligible must have seen their incomes drop by 50% from the same month last year, or seen their income fall by an average of 33% in the last three months.
- The government is eyeing late June or early July for passage. This poses a problem, as the current Diet session is set to end on June 17. Many lawmakers are calling for an extension of the parliamentary session, but Prime Minister Abe Shinzo is set to introduce the budget proposal in the Diet by June 8 to see it enacted on the session’s last day.
Government lifts state of emergency in Tokyo and Hokkaido
- Prime Minister Abe has lifted the state of emergency in the last five remaining prefectures (Tokyo, Kanagawa, Saitama, Chiba and Hokkaido), following the recommendation of the government’s expert panel. The five prefectures reached the numerical targets set by the central government that indicate the infection is under control.
- However, he has warned that a second emergency declaration could be issued should infections surge again. The government is focusing on early prevention in the hope of avoiding strict measures that would undermine economic performance.
- The Cabinet wants to launch a tracing app from mid-June, believing such tools could prevent the need for lockdown measures in the future. The PM has stressed that the government will continue to expand the delivery of PCR tests and the creation of new testing centers.
Bank of Japan approves ¥30 trillion program to promote loans to small businesses
- The Bank of Japan has started a new ¥30 trillion yen program to support small businesses. The central bank will lend to commercial banks with zero-interest rates for up to a year, if the latter makes loans available to small businesses.
- However, for these loans to be accepted they will need approval and a guarantee (already in place, with ¥24 trillion reserved for commercial loans) from the central government.
- Additionally, the BOJ will subsidize loans to commercial banks by giving out 0.1% interest on the loans made.
The BOJ’s next policy meeting is scheduled for June 15 and June 16.
Tokyo to ease restrictions from May 31
- The Tokyo Metropolitan Government announced on May 15 a timeline for easing restrictions on businesses and non-essential activity. Tokyo’s state of emergency is still active, but it is working toward deescalating measures imposed at the local level.
- The city’s plan has three targets: fewer than 20 new infections per day, more than half of infections are traceable, and the weekly infection rate increase must be lower than the previous week.
After achieving these objectives, the metropolitan government will ease requests to close businesses and avoid non-essential travel. From May 31, restrictions will be lifted in three stages: opening facilities necessary for daily life (schools, gyms, museums etc.), followed by facilities with lower risks of infection (retail stores and cram schools), and then remaining facilities. In the first stage, restaurants will be asked to close at 10PM, instead of 8PM.
- Tokyo Governor Koike Yuriko has warned that if these targets are not met, she may ask for further restrictions.
Cabinet approves ¥200,000 cash handout for struggling students
- The Cabinet has approved a plan to provide up to ¥200,000 to students facing difficulty paying for tuition and living costs due to the outbreak. About 430,000 university, high-school, technical and vocational college students will be eligible, including students from overseas.
- ¥200,000 will be offered to low-income households, and ¥100,000 to the rest of students. The funds will be distributed by the Japan Student Services Organization, and schools will determine which students receive what amounts.
- This program will cost about ¥53 billion, and will be financed by reserves from the supplementary budget approved in April.
September school start delayed until 2021 or later
- PM Abe said in the Diet that the government will seriously consider moving the start of the academic year to September from April because of nationwide school closures. He noted that the change would have wide-ranging effects for not only students and parents, but for society as a whole.
- The Japanese government has decided to keep the current academic calendar that begins in April, despite multiple calls, including from prefecture governors, to move it to September. According to LDP party officials and lawmakers, shifting the start to September would have been too soon to extensively discuss budgetary issues.
- Nonetheless, the government will prepare a blueprint in June to move the school year, while the LDP’s own blueprint will be released this month. Komeito will also release its plan in June.
Tokyo to propose local supplemental budget in June
- The Tokyo Metropolitan Government will offer more subsidies to SMEs in the prefecture that have agreed to suspend operations. The program will be similar to that previously devised by the city government, including handouts of ¥500,000 to proprietors of a single shop and ¥1 million to those running multiple branches. Payouts began May 11. The city will also help businesses asked to suspend operations.
- Eligible establishments include restaurants, bars and live event venues. The plan will cost about ¥96 billion, and about 130,000 businesses are expected to be eligible. The supplemental budget is expected to total about ¥192 billion.
- The Tokyo Metropolitan Government will put the budget to the city assembly in June.
Labor Ministry wants to pay unemployment benefits to workers on leave
- The Ministry of Health, Labour and Welfare wants to implement the deemed unemployment system used in disaster areas after the earthquake in March 2011. That means that the government can pay employees taking leave the same amount provided by regular unemployment benefits, as long as the state of emergency lasts.
- Workers will have to submit a streamlined application to their local unemployment office to receive an instant payment. Payments will be capped at ¥8,330 per day, but amounts will vary depending on the employee’s income and how long they have paid unemployment insurance.
- This still requires government approval and a subsequent parliamentary amendment to current law. The government hopes to use this measure to help workers in financial difficulty, even if they were not formally dismissed by their employer.
Government to inject capital in medium- and large-sized corporations
- The central government will also inject cash in medium and large-sized corporations, also struggling with the effects of the pandemic. These will add to the already ongoing government support through low-interest loans and subsidies. Cash injections, however, for large corporations, will remain as a safety net should their negative economic outlook continue or worsen.
- The government plans to introduce subordinated loans through the Development Bank of Japan and the Japan Finance Corporation. Purchase of stocks with no voting rights for companies whose finances have decreased rapidly, will also be considered by the government.
- These measures will be funded by the second extraordinary budget, to be drafted as early as this month. Necessary amendments will be introduced into law so as to allow the injection of public capital to help private financial institutions beyond the current deadline of March 2022.
Government to inject capital in troubled SMEs
- The government will establish a program to directly finance SMEs severely hit by the current economic crisis. The Regional Economy Vitalization Corporation, a public-private partnership, will distribute up to ¥1 trillion to financially troubled companies where loans would not be sufficient.
- The scheme allows for an injection of up to ¥10 billion per company. Eligible companies will be SMEs that are important to local and regional economies, have at least ¥1 billion worth of annual sales and a minimum of 50 employees. About 10% of SMEs in Japan are expected to meet those requirements. Most recipients will be in the hotel, logistics, tourism and retail industries, as well as subcontractors of large companies. Companies that were struggling before the effects of the pandemic on the economy are not eligible for funding.
- The goal is to avoid bankruptcies that would deal a severe blow to regional economies. Additional measures will be discussed if they are believed to be necessary to support local businesses.
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Langley Esquire President & CEO Timothy Langley was featured in the July 2019 issue of the ACCJ Journal on a publication focused on reducing headcount in Corporate Japan. Foreign companies frequently run afoul of best-practices in Japan, resulting in damage to brand reputation and in the worst case, labor disputes.