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Politics

Japan's $1tn coronavirus aid sits mired in bureaucratic logjam

Less than 40% have received $930 cash payout from first spending package

Financial relief has been slow to reach businesses hit by shutdown requests. (Photo by Kento Awashima)

TOKYO -- Despite a series of spending packages Japan has enacted to ease the economic pain from the coronavirus pandemic, relief has been slow to reach struggling businesses and individuals as onerous applications and technical glitches delay the process.

The Diet on Friday approved the second supplementary budget for fiscal 2020, touting programs worth a record 117 trillion yen ($1.09 trillion). But the passage was met with little fanfare from the public as much of relief from the first spending package approved at the end of April has yet to reach intended recipients. 

"I cannot rely on the government, and I'm scared to face tomorrow," said a 56-year-old woman, who worked at an event management agency until she was let go on April 9, just days after the government issued a state of emergency in seven prefectures. She said she does not want to touch her 3 million yen, or $28,000, in savings.

The centerpiece of the first spending package, also totaling $1 trillion, was a one-off payment of 100,000 yen to every Japanese resident, seen as providing a quick lift to economic activity. But as of Wednesday, Just 49.1 million, or less than 40%, had received this assistance.

In the meantime, the nation has seen surging unemployment and businesses teeter on the brink of bankruptcy. 

"In May alone, I lost jobs worth 1 million yen in income," said a 26-year-old freelance wedding photographer, who lives in Urayasu, Chiba Prefecture. He is scheduled to receive 1 million yen in aid for struggling businesses, but knows many friends who decided to shut down businesses or are looking for other jobs. 

The government pledged Friday to speed up distribution for the second relief package.

"We hope to start taking applications within a month," Labor Minister Katsunobu Kato said, referring to a new assistance program in the second supplementary budget that targets workers placed on leave because of the coronavirus.  

The program allows workers to seek compensation directly from the government instead of going through their employers. It was designed as a faster alternative to the existing employment adjustment subsidy, given that 5.97 million workers across Japan had been placed on leave as of April.

But the government is still ironing out the details, including a way to avoid overlap between the two programs. Beneficiaries likely will not be receiving payments until at least late next month.

In distributing the 100,000 yen cash payouts, 71 localities had to halt online applications due to delayed system updates, forcing staffers to physically check applications against the list of qualifying recipients. This is in start contrast to in South Korea, where the government disbursed all assistance in two weeks, thanks to creative solutions like using credit card points.

Similarly, the government had received 155,000 applications for employment adjustment subsidies as of Thursday -- a program intended to help businesses place people on paid leave instead of firing them amid the pandemic. So far, only 87,000 or 56% of the cases have been approved.

"Our head of HR spent an entire month on the process while our company was on the brink of bankruptcy," said a source at a restaurant chain. Many employers gave up completely due to the complexity of the application.

There is little sign the second budget will be any different, especially as the government asks for more documentation from applicants to prevent fraud. For example, small and midsize businesses applying for rent assistance will need to submit documents proving their rent amount and a fall in revenues. Because of the number of documents involved, companies are not expected to receive the funds for more than two weeks.

University students struggling to make ends meet will also need to provide numerous documents to qualify for up to 200,000 yen assistance. They theoretically can submit applications to their schools through the Line messaging app, but only about 22.5% of universities are actually using the app.

"Japan's government offices have few information technology experts," said Hosei University professor Kazumasa Oguro, urging the government to tap outside talent to create more effective online systems.

Transparency has been another major flashpoint in the budget process. The government contracted an outside organization to handle a subsidy designated for struggling small and midsize businesses. But the organization then subcontracted about 97% the operation to ad agency Dentsu, triggering criticism that it only signed up to skim part of the funds for itself.

Critics took issue with a 10 trillion yen reserve fund included in the budget as well. Past leaders have been cautious about these funds, which can be deployed without parliamentary approval. Though the political opposition was initially in favor of setting up a reserve fund of some sort, many feel 10 trillion yen is too much, and that the government did not allow for enough debate.

"Are we supposed to approve anything just because it's an emergency?" said a Finance Ministry official.

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