Japan officially declares coronavirus emergency, prepares near $1trn stimulus

The state of emergency however will stop short of imposing a formal lockdown as seen in other countries

Japanese Prime Minister Shinzo Abe on Tuesday officially declared a state of emergency to fight new coronavirus infections in major population centres and unveiled a stimulus package he described as among the world’s biggest to soften the economic blow.

Experts and local leaders have pushed for the declaration, which is the first in country's history, and 80% of people polled by public broadcaster TBS over the weekend said they backed the move. It is expected to take effect from midnight and will empower governors of seven affected regions to ask people to stay inside and businesses to close their doors. As announced today, the seven regions that will be affected are Tokyo, neighbouring Chiba, Kanagawa and Saitama, the western hub of Osaka and neighbouring Hyogo, and the southwestern region of Fukuoka, which are all accounting for about 44% of Japan’s population. 

“We have decided to declare a state of emergency because we’ve judged that a fast spread of the coronavirus nationwide would have an enormous impact on lives and the economy,” Abe told the parliament today.

The declared state of emergency, however, stops far short of the sort of lockdown seen in parts of Europe and the United States. Instead, the emergency gives governors the authority to call on people to stay at home and businesses to close. With no penalties for those who fail to comply, enforcement will rely more on peer pressure and respect for authority.

But the restrictions will add to pains the virus is inflicting on the world’s third-largest economy, which is seen as already in recession as supply chain disruptions and travel bans chill factory output and consumption. Metropolitan Tokyo alone accounts for about 20% of Japan’s overall gross domestic product. Abe's cabinet thus announced it is finalising the stimulus package worth 108trn yen ($990bn) - equal to 20% of Japan’s economic output - to cushion the impact of the epidemic on the world’s third-largest economy. That exceeds the 11% of US output for the stimulus package laid out by President Donald Trump and 5% of output for Germany’s package.

Abe said direct fiscal spending would amount to 39trn yen, or 7% of the economy, more than double the amount Japan spent following the 2008 collapse of Lehman Brothers.

While the stimulus could ease the immediate damage from the pandemic, lawmakers are already calling for even bigger spending to prevent bankruptcies and job losses. Analysts expect the economy, which shrank in the final quarter of last year, to post two more quarters of contraction, piling pressure on the government and the central bank to do more.

“The government will probably compile another supplementary budget soon to stimulate the economy with even more spending,” said Takahide Kiuchi, a former Bank of Japan board member who is now an economist at Nomura Research Institute.

Japan has been spared the big outbreaks of the coronavirus seen in other global hot spots, but a recent, steady rise in infections in Tokyo, Osaka and other areas led to growing calls for Abe to announce a state of emergency. Coronavirus infections in Tokyo more than doubled to about 1,200 in the past week, with more than 80 new ones reported on Tuesday, accounting for the highest number in the country. Nationwide, cases have climbed past 4,000 with 93 deaths as of Monday.

More on this subject: Coronavirus

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