March 18, 2020 / 3:21 AM / 14 days ago

Japan to launch panel to mull big stimulus package to battle hit from virus

TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe will form a panel of key ministers and the central bank governor on Thursday to lay out a package to help the economy weather the hit from the coronavirus outbreak, a government official said on Wednesday.

Japan's Prime Minister Shinzo Abe attends a news conference on coronavirus at his official residence in Tokyo, Japan February 29, 2020. REUTERS/Issei Kato

The move puts Japan in line with nations across the globe preparing more costly measures to combat the global fallout of the coronavirus that has sent economies spinning toward recession.

Discussions by the panel will lay the groundwork for a stimulus package the government plans to launch in April, which Abe had said would include “bold and unprecedented” steps.

“In terms of what’s happening in the economy, it may be something similar to what we saw during the Lehman crisis” in 2008, Finance Minister Taro Aso told parliament on Wednesday.

Bank of Japan Governor Haruhiko Kuroda stressed the central bank’s resolve to ease monetary policy again if the economy worsens further from the fallout of the epidemic.

“If it takes long to contain the virus, that could have a severe impact on the economy. If so, we will of course take additional monetary easing steps without hesitation,” he said on Wednesday, keeping expectations alive for another bout of stimulus as early as next month.

Kuroda will participate in the panel, which will be held almost daily through the end of March to collect views from economists and corporate executives on ways to mitigate the hit from the virus outbreak, the government official with direct knowledge of the matter told Reuters on Wednesday.

OLYMPICS AS SCHEDULED

The epidemic has hit Japan’s economy, already reeling from last year’s sales tax hike and soft global demand, heightening the chance of a recession and stoking speculation the Tokyo Olympic Games may be cancelled or postponed.

“We’re not making any adjustments to postpone the Games,” the government’s top spokesman Yoshihide Suga said, stressing Tokyo’s resolve to host the event as planned.

As of Wednesday morning, Japan had 29 deaths and 868 coronavirus cases, excluding those from a cruise ship that was quarantined near Tokyo last month and returnees on chartered flights from China, a tally by public broadcaster NHK showed.

To soothe market jitters, the BOJ eased monetary policy through an increase in risky asset purchases in an emergency meeting on Monday.

But that did little to turn around market sentiment soured by worries over the coronavirus outbreak. The yen - sought as a safe haven - rose and Japan’s Nikkei share average fell to its lowest finish since 2016 on Wednesday.

Given the BOJ’s depleted ammunition, the onus is now on fiscal policy to deal with the blow from the epidemic that has cooled consumption through school shutdowns, travel restrictions and event cancellations, analysts say.

As the Trump administration eyes $1 trillion in stimulus, Japan’s ruling party lawmakers are calling for tax cuts and a spending package of up to 30 trillion yen ($280 billion) - roughly equivalent in population terms. Abe has said he will take the proposal into account.

“It’s true we need to take various, bold steps,” finance minister Aso said, though he brushed aside proposals by some lawmakers to cut Japan’s 10% sales tax rate.

He also said Japan had no immediate plan to offer cash payouts to households, denying a media report the idea could work its way into the stimulus package.

($1 = 107.4600 yen)

Reporting by Yoshifumi Takemoto and Leika Kihara; additional reporting by Kaori Kaneko; Editing by Sandra Maler, Gerry Doyle and Philippa Fletcher

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