Only 37% Repayment in 2023 for Special COVID Loans; Hundreds of Billions Might Ultimately Be Uncollectible

Yomiuri Shimbun file photo
The Health, Labor and Welfare Ministry in Tokyo

The government had planned to collect about ¥104.7 billion in COVID-19 loans in 2023, but only about 37% of that amount was actually repaid, according to the Health, Labor and Welfare Ministry.

If steps are not taken to amend the situation, hundreds of billions of yen might ultimately be uncollectible.

A total of ¥1.4431 trillion in special COVID-related loans were provided through national government bonds from March 2020 to September 2022. The loans were meant for people whose income had fallen mainly due to suspension of their business as a result of the pandemic. Each household could borrow up to ¥2 million in total without interest through prefectural social welfare councils.

The loan system consisted of two categories: small emergency loans paid in a lump sum, and comprehensive support funds needed to rebuild borrowers’ lives. About 1.6 million households are believed to have made use of the system.

Repayments started nationwide from January 2023, and about ¥104.733 billion was due by the end of that year. However, the actual amount returned was only about ¥38.768 billion, or 37% of the planned total. About ¥65.965 billion in loans was deemed uncollectible loans.

Repayments are likely to continue until around 2034.

If the repayment rate of around 40% continues, the ministry said, uncollectible loans will amount to hundreds of billions of yen and could top ¥600 billion.

According to the Japan National Council of Social Welfare, people who have not repaid their loans may have other debts, or their income may not have returned to pre-pandemic levels.

Prefectural social welfare councils are sending letters and visiting people in arrears to urge them to repay the money.

Some have said the low repayment rate is a result of the central government swiftly dispensing loans.

Some officials in prefectural social welfare councils have said they had to provide the loans without fully ascertaining applicants’ ability or intention to repay the money.