Japan's Abe leans toward blanket cash payouts to fight coronavirus downturn

By Leika Kihara and Yoshifumi Takemoto

TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe has decided to change a draft supplementary budget to allow blanket cash payouts to all citizens, a government official said, as the coronavirus pandemic bites deeper in the world's third-largest economy.

Under the current supplementary budget plan, the government sets aside money to fund cash payouts of 300,000 yen ($2,784) but only for households whose income is judged to have been hit by the coronavirus.

Abe's administration will change the plan and instead deliver 100,000 yen each to every citizen, the official with direct knowledge of the matter told Reuters.

The change would be a nod to growing calls from ruling and opposition lawmakers for Abe to take bolder steps to soften the economic blow of the coronavirus, such as by handing out more cash to more people.

The International Monetary Fund, which expects Japan's economy to contract 5.2% this year, urged the government to boost fiscal spending and focus on easing the hit to growth.

“In the near term, expansionary fiscal policy is warranted to mitigate the impact of the COVID-19 in the short term and support the recovery afterwards,” said Odd Per Brekk, deputy director of the IMF's Asia and Pacific department.

Rising coronavirus cases and business closures are piling pressure Japan's economy which is on the cusp of recession.

Sources have told Reuters the Bank of Japan is likely to project an economic contraction for this fiscal year and discuss further measures to ease corporate funding strains at its rate review on April 27-28.

The government has declared an emergency in Tokyo and six other areas including Osaka, with more than 9,000 infections nationally and nearly 200 deaths.

The Yomiuri newspaper reported on Thursday that Japan was preparing to expand the emergency nationwide to respond to the widening pandemic.

The draft supplementary budget, compiled to fund a near $1 trillion stimulus package Abe's administration unveiled last week, needs parliament approval to take effect.

It is rare for the government to make changes to a draft budget, which is carefully mapped out by the finance ministry taking into account the various views of politicians.

Any such modification would underscore the challenge Abe faces in dealing with the deepening economic toll from the pandemic, without adding too much strain to Japan's already tattered finances.

A Reuters poll showed most Japanese corporations were disappointed by the government's stimulus plan as being too little, too late.