Japan approves second stimulus package amid COVID-19

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The latest aid was finalized after data last week confirmed Japan has sunk into a deep recession and polls show support for Prime Minister Shinzo Abe's cabinet dropping to a record low over its handling of the outbreak.

"There's a possibility of a third extra budget", said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank. "We are facing a crisis that goes beyond the scale of the Lehman shock". "We'll protect jobs and businesses", he said. Economists have predicted that there could be an enormous drop to as much as -20% this quarter. The budget also will pay for measures to help prepare for possible future waves of infections, including development of vaccines and treatments for COVID-19.

The budget's finance-related contributions, such as the 39.3 trillion yen designated under the fiscal investment and loan program, is a major contributor to the large overall figure.

The 117.1 trillion yen ($1.09 trillion) second supplementary budget that was approved by the Japanese cabinet on Wednesday, when put together with an earlier supplementary budget, brings total stimulus measures to 230 trillion yen.

The government's extra spending comes amid reassurances from the Bank of Japan it won't allow bond yields to rise.

The packages took the size of this fiscal year's budget to a record 160 trillion yen, with new bond issuance making up 56.3% of annual budget revenue and raising the spectre of more bond issues later to offset falling tax income.

The stimulus, which will be funded partly by a second extra budget, will be on top of a $1.1 trillion package already rolled out last month, putting the total amount Japan spends to combat the virus fallout at 234 trillion yen - roughly 40% of Japan's gross domestic product.

The new spending will push Japan's debt dependency ratio up to a record 56.3 per cent, added the Finance Ministry.

Japan was the world's largest holder of overseas net assets for the 29th consecutive year, the ministry said.

Still, Mr Aso said now was clearly not the time to be fretting about fiscal reform.

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