¥55 tril. stimulus package must not end up as ineffective handouts
November 20, 2021
While all possible means must be taken to deal with the novel coronavirus, it is irresponsible to let the amount of money just balloon unchecked. It is hoped the Diet will thoroughly debate whether the budget is truly effective.
The government has mapped out its first economic stimulus package under Prime Minister Fumio Kishida’s Cabinet. According to the government, it will be the largest economic stimulus package ever, totaling ¥55.7 trillion, which includes central and local government spending and fiscal investments and loans. The overall amount has been inflated by cash benefits to individuals and businesses, among other measures.
The scale of the package, including private-sector and other spending, totals ¥78.9 trillion. The government plans to submit a supplementary budget proposal for the current fiscal year totaling ¥31.9 trillion, including necessary expenses for the package, at the extraordinary Diet session in December.
The current situation is somewhat different from last year, when the COVID-19 pandemic dealt a serious blow to the public, as the spread of the disease has subsided and economic activities are getting back to normal.
While it is important to support people in need, it is doubtful that such large-scale measures as this are necessary. The ruling parties are likely stuck on fulfilling pledges made in the House of Representatives election campaign.
The substance of many items in the package is unclear in terms of effectiveness or consistency.
A benefit equivalent to ¥100,000 will be provided to children 18 or younger, but because the limit for parental income has been set at ¥9.6 million, about 90% of children will be eligible. This is in effect a handout policy.
Since the limit is applied to the annual income of whichever parent earns more rather than the combined income of both parents, a dual-income household where each parent earns ¥8 million, for example, would be included. Even within the Liberal Democratic Party, there is criticism that the income limit should be based on the combined household income.
In addition, in response to the soaring price of crude oil, there is talk of an unusual subsidy system being established. If the average price of gasoline exceeds ¥170 per liter, the government will subsidize oil wholesale companies by up to ¥5 per liter.
However, the final retail price is decided by retailers, not the wholesale companies, and there is no guarantee that this will lead to lower prices. With costs for everything from food to electricity rising, it is unclear why the government is only subsidizing oil products.
Up to ¥2.5 million will be provided as “business recovery support benefits” to small and medium-sized businesses whose sales have declined.
In a similar program previously used, the Board of Audit found it problematic that the payment procedures were subcontracted out to sub-subcontractors over as many as nine stages. There was even an incident of bureaucrats from the Economy, Trade and Industry Ministry, which is in charge of the benefits, fraudulently acquiring them.
It is urgent for the government to take a hard look at the situation and establish an appropriate enforcement system.
Last fiscal year, the government threw massive amounts of funds at COVID-19 measures through three supplementary budgets, but the effect on the economy was meager. It is hoped that the government will verify the appropriateness of the use of the funds.
— The original Japanese article appeared in The Yomiuri Shimbun on Nov. 20, 2021.
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