TOKYO -- The government of Japan on Tuesday night approved a financial aid package worth 1 trillion yen ($9.6 billion) for small and medium-sized enterprises as well as self-employed workers affected by the new coronavirus.
"Financing will focus on small and tiny businesses which need financing over the next two to three weeks," said Finance Minister Taro Aso.
The government rolled out its first financial support package worth 500 billion yen in February, which provides low-interest loans for SMEs, particularly in the tourism industry. The second package will bring the total amount of financial support to 1.6 trillion yen.
Kengo Sakurada, chairman of corporate lobby Japan Association of Corporate Executives, said the government's fiscal stimulus would be key to avoiding an economic downturn. "It's important to offer abundant support early," he said.
As part of the second package, the government will consider offer loans of up to 300 million yen at less than 1% annual interest to SMEs whose sales have declined 5% or more due to the viral outbreak. For SMEs and self-employed workers who saw a 10% to 20% decline and have to borrow from a bank, the government will pay the interest on the loans.
"Damages from the new coronavirus has hit small and medium-sized businesses particularly hard, regardless of region, industry or company size," said Nobuo Tomoda, senior manager of the research department at Tokyo Shoko Research.
Some companies have seen business plans gone awry or have halted procurement, forcing them dangerously close to bankruptcy. Production at a semiconductor parts manufacturer in Tokyo has stalled due to a difficulty in shipping parts to China. Shipping delays have left the company and others like it with little chance in the short term to recover development and production costs.
The 1 trillion yen package will also help large companies. The Development Bank of Japan, among others, will draw on a 200-billion-yen war chest to support companies who want to relocate production back to Japan. The funds will utilize a crisis financing system created in the wake of the 2008 global financial crisis.
The Japan Bank for International Cooperation will also secure approximately 250 billion yen in funding, mainly to support the overseas operations of Japanese companies.
Parents burdened by school closures requested by Prime Minister Shinzo Abe on Feb. 27 will be compensated, starting with school meal fees. In addition, some freelancers and self-employed parents may receive a daily compensation of 4,100 yen if forced to curtail work.
A provision in the aid package calls for offering freelancers and non-regular workers interest-free loans of up to 100,000 yen. If their annual income declines by 20% or more, the government will consider waiving their debts.
Asked by reporters on Tuesday whether the government will need a supplemental budget to address the coronavirus, Aso said, "We don't know yet because we haven't fully assessed the situation."
The government will also contribute about 15 billion yen for emergency assistance to infected countries through the World Health Organization and other institutions.
In a related matter, Abe extended by "around 10 days" the period he wants big sports and cultural events to be canceled or postponed, saying he would like to see how that and other containment measures are working out.
The original request, made Feb. 26, was for two weeks.
Speaking at a meeting of a government task force on the virus response, Abe said the extension will allow a government panel of medical experts to assess the situation so it can issue a report around March 19.