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Coronavirus

Japan to offer $112bn safety net to companies hit by pandemic

Goal is to prevent credit downgrades and help businesses get private financing

The Japanese government's $112 billion assistance package aims to shore up the finances of companies hit by the coronavirus, helping them obtain private credit. (Photo by Wataru Ito)

TOKYO -- The Japanese government will provide 12 trillion yen ($111.62 billion) in aid to companies to help them cope with the effects of the new coronavirus.

The Development Bank of Japan and public-private funds will use subordinated debt and stock purchases to support companies that have seen their finances deteriorate due to the pandemic. It will also help them restructure after the outbreak subsides.

With the end of the crisis not yet in sight, the government is moving to strengthen its corporate safety net, offering quick assistance to companies in difficulty. The funds will be a part of a supplementary budget and the Fiscal Investment and Loan Program plan to be put together later this month.

Of the 12 trillion yen, about half is expected to be subordinated loans from the Development Bank of Japan, the Japan Finance Corporation and other government-affiliated financial institutions.

Subordinated debt financing will increase companies' capital. The hope is that this will forestall credit downgrades and make it cheaper for companies to secure additional financing from other lenders.

The government-affiliated lenders will not be deeply involved in corporate management, which should make it easier for companies to accept the funds.

The remaining 6 trillion yen will come through investments and other frameworks. For large and midsize companies, along with doubling the existing 100 billion yen investment framework set up by the Development Bank of Japan, the government will prepare funding for investments in growth and restructuring through the Japan Investment Corporation.

For small and medium-size businesses, it plans to use the Regional Economy Vitalization Corporation of Japan to expand regional funding and revive companies. The government will also set up a fund to purchase bonds.

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