TOKYO -- Prime Minister Yoshihide Suga will zero in on green and digital technology under new economic plans as the nation tries to balance spurring growth and containing the coronavirus outbreak.
Japan until now has largely prioritized easing the economic blow from the pandemic through cash relief to households and businesses. The government is now changing tack to focus more on structural changes to reduce carbon emissions and to promote 5G wireless technology while keeping the coronavirus at bay.
"We need to think of how to use every available tool to quickly put Japan back on a trajectory of growth," Suga said Monday at a meeting of the Council on Economic and Fiscal Policy.
He told the council to look into measures for "green growth" -- a strategy of generating synergies between the economy and the goal of net zero carbon emissions by 2050. The measures will be funded in the third supplementary budget for fiscal 2020.
Other countries are stepping up environment-related investments as well. As a candidate, U.S. President-elect Joe Biden pledged to invest $2 trillion in clean-energy infrastructure, while the European Union plans to use a big chunk of its 750 billion euro ($890 billion) coronavirus recovery fund to fight climate change.
Japan will also tackle economic reforms in the third supplementary budget. It plans to assist companies investing in 5G and post-5G technologies, as well as smaller businesses switching to more lucrative fields. Some members of the ruling coalition are calling for a supplementary budget of about 30 trillion yen, including to update infrastructure.
Japan's first and second supplementary budgets set aside 12 trillion yen for payments of 100,000 yen per resident, as well as roughly 5.3 trillion yen in subsidies to smaller companies to make up for lost income. The government likely will not provide such assistance in its third supplementary budget.
The employment subsidy, designed to discourage companies from dismissing workers, will be continued but downsized after January. The government will also extend subsidies for domestic trips under the "Go To Travel" campaign, though it will adopt a stricter criteria for participants.
Japan's shift away from cash relief and other urgent coronavirus response measures represents a marked difference from the U.S. and Europe. For example, the Democratic Party in the U.S. is calling for a new $2.2 trillion package, including a second round of up to $1,200 in tax credits. The package would also extend existing relief measures, like higher unemployment payments, small business loans to protect employment, and airline subsidies.
Meanwhile, Europe is scrambling to adjust policies in response to a second wave of lockdowns. Germany is covering 75% of monthly revenue, calculated based on year-earlier figures, for companies that have been forced to shut down. The U.K. will pay furloughed workers 80% of their wages until March, extending the program beyond its original end date.
Japan has significantly lower infections, averaging about 920 a day over the last week, compared with 109,000 in the U.S. and 22,000 in the U.K.
"We will definitely prevent an explosion of cases," Suga has said. With numbers creeping up, the third supplementary budget will likely include measures to curb new infections.
Japan is also wary of funding further wage relief, owing to fiscal constraints. The country has already spent the equivalent of 35% of its gross domestic product on coronavirus relief, according to the International Monetary Fund -- about as much as Germany and Italy, and much higher the U.S. figure of 14%. Japan's government debt is at 266% of GDP this year, twice the American percentage.
