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Coronavirus

Japan struggles to dish out $270bn in untapped COVID stimulus

Consumer-spending programs like 'Go To Travel' stall amid slow vaccine rollout

"Go To Eat" and "Go To Travel" are among the programs designed to encourage consumer spending in pandemic-hit industries, but much of the funding remains untapped.   © Kyodo

TOKYO -- Japan is sitting on 30 trillion yen ($271 billion) of coronavirus relief funding, underscoring the struggles the government faces in delivering financial support in a timely fashion.

The government has budgeted 73 trillion yen since spring of last year to combat the impact of the COVID-19 pandemic. The outlays include 100,000-yen stimulus payments per person and funding for Go To Travel programs that seek to lift the battered tourism industry.

However, with more than 40% of those funds collecting dust, questions have risen over whether the central government was more concerned with headline-catching numbers instead of how the money would be allocated.

For example, the 2 trillion-yen decarbonization fund was added to the third extra budget of the 2020 fiscal year, which passed this January. Yet it wasn't until April that the Ministry of Economy, Trade and Industry announced eligible sectors, finally allowing businesses to apply.

The delay stems from lawmakers prioritizing the debate on the size of the decarbonization fund. The provision was added to the extra budget without the specifics of the government support being finalized.

The third extra budget, funded at 21 trillion yen, is one of the main reasons behind the substantial remainder in COVID funds. The other is the persistent nature of Japan's coronavirus epidemic.

Prime Minister Yoshihide Suga told parliament this month that about 30 trillion yen worth of unused funds is being carried over to this fiscal year's budget.

Such a figure is virtually unheard of. During the 2011 and 2012 fiscal years, before and after the March 2011 earthquake and tsunami, the carry-overs amounted to just over 10 trillion yen for each of those years.

Decarbonization investments, digitalization job training and other strategic areas require significant funding to ensure post-COVID economic growth. In May 2020, then-Prime Minister Shinzo Abe pledged he would "protect the Japanese economy" by rolling out a 230 trillion yen stimulus.

Abe billed the stimulus package as the "biggest in the world," equivalent to 40% of the gross domestic product.

But about a year later, only 35 trillion yen in state funding reached households and companies, or approximately 7% of GDP. In contrast, the U.S. injected $2.8 trillion in COVID funds into the economy through April 30, or 13% of GDP.

This comparison excludes the Bank of Japan's emergency funding facilities that help banks provide financial assistance to struggling businesses.

Abe's 230 trillion-yen headline number included private spending along with public funds. The BOJ program alone is 100 trillion yen in scale. A comparable corporate assistance scheme in the U.S. is only 9% of the coronavirus stimulus package.

A Nikkei review of a Cabinet Office audit completed last month shows that a number of stimulus programs are spending funds as expected. More than 90% of households received the 100,000-yen stimulus payments and other assistance from the government, for instance.

But programs designed to encourage consumer spending, such as the Go To Travel campaign, only spent 35% of their combined budgets. The slow vaccine rollout had an outsized effect of limiting consumption and investments.

The U.S., Europe and China are competing with each other on long-term spending for areas key to post-COVID growth, particularly on the green and digital sectors. There are growing calls within Japan's ruling Liberal Democratic Party to enact a supplementary budget this fiscal year. Policymakers will likely face pressure to put together a package that prioritizes the precision of the agenda over quantity.

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