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Japan after Abe

Japan to start work on new stimulus package by year's end

Suga expected to wait on snap election until 2021 as calendar fills up

Japanese Prime Minister Yoshihide Suga, left, talks with his deputy and finance minister, Taro Aso, ahead of a Sept. 29 cabinet meeting. (Photo by Uichiro Kasai)

TOKYO -- The government of new Prime Minister Yoshihide Suga and Japan's ruling coalition have begun discussing a fresh round of spending on coronavirus prevention and steps to pull Asia's second-largest economy out of recession, to be ready as early as this year.

The stimulus package will be funded by Japan's third extra budget for the current fiscal year. This proposed budget would be submitted to the parliament when it convenes for a regular session in January, said Hiroshi Moriyama, the Liberal Democratic Party's chief of parliamentary affairs, in a Nikkei interview Thursday.

This schedule adds to signals that Suga will wait until 2021 before calling a snap general election, which some had expected him to do as he rides high in opinion polls.

The economic damage caused by the COVID-19 pandemic means "we have no choice but to plan for the third supplementary budget," Moriyama said.

"Some industries have suffered really terrible slumps," he said, citing hospitality and tourism. "We must plan for additional support for sectors that have been hit hard."

During last month's LDP leadership race to succeed outgoing Prime Minister Shinzo Abe, Suga said there was a need for an economic stimulus package. He laid out specific proposals, such as raising Japan's minimum wage and expanding national insurance coverage for infertility treatments.

If the third extra budget passes swiftly, it could take effect before the current fiscal year ends March 31, letting the new prime minister make good on his pledges.

Business sentiment among Japanese manufacturers improved for the first time since 2017, the latest Tankan quarterly survey released Thursday by the Bank of Japan found. But the gauge is at minus 27, roughly on par with the minus 24 recorded during the height of the global financial crisis.

Preparations for the new stimulus package will add to a packed calendar through year's end. Suga travels to Southeast Asia in mid-October and plans to call an extraordinary session of parliament when he returns.

In that session, expected to last until early December, lawmakers will deliberate ratification of the trade deal between Japan and the United Kingdom, among other key bills.

During the year-end period, the central government will focus on a 105 trillion yen ($994 billion) budget proposal for next fiscal year and a tax reform bill, along with the stimulus package.

If Suga dissolves the lower house of parliament this year, it would leave a political vacuum lasting about a month. That would delay the budget process, which risks endangering his priority of tackling the coronavirus crisis.

Suga's cabinet enjoyed 74% support at its outset last month, one of the highest levels for a new government, according to a Nikkei poll. This fueled expectations of an impending snap election. But LDP Secretary-General Toshihiro Nikai -- the party's de facto No. 2 official -- expressed concerns this week about rushing to the polls, as have other senior party members.

Now the lower house is expected to be dissolved for a general election during one of three periods: when the parliament convenes in January, when the fiscal 2021 budget passes in late March, or later or around the LDP's next leadership race in September 2021.

Additional reporting by Yuta Shimamoto in Tokyo.

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