Struggling households receive ¥1.4 tril. in pandemic relief loans

The Yomiuri Shimbun

12:52 JST, June 16, 2022

A total of ¥1.4 trillion in special government loans was paid to households in need amid the coronavirus pandemic as of the end of May, triggering concerns that many borrowers will be unable to pay back the money when repayments begin in January next year.

In light of the situation, the central government has launched discussions on measures to strengthen employment support and help people in need rebuild their lives.

“Our life was in shambles, so [the loan] was a huge help,” said a 48-year-old single mother raising two high school students in Kanagawa Prefecture. She borrowed ¥800,000 under the pandemic loan program between October and February.

She used to earn about ¥270,000 a month doing clerical work on weekdays and working at eateries on weekends, but in September, she got infected with the coronavirus. This left her without an income, and she had to use her savings to pay rent and other expenses.

When she returned to work, she said she was too weak to continue doing the same workload as before, and reduced her hours, after which her monthly income dropped to less than ¥100,000.

With the money from the special loan program, she managed to pay her bills and the fees of a cram school her younger son was attending in preparation for high school entrance exams. She has gradually been increasing the number of hours she works, but her income has not returned to the level it was before the coronavirus infection.

From January next year, she will have to pay back ¥8,000 a month. “I’ll do my best to repay the money, but it’ll be a heavy burden,” she said.

The special loan program began in March 2020, with the expansion of two previously existing loan programs for low-income households.

Up to ¥2 million can be borrowed under the program and two types of interest-free loans are offered: an emergency one-time loan, and a general support loan, through which funds are provided to help people rebuild their lives.

According to the Health, Labor and Welfare Ministry, about 3.2 million loans were taken out in the twenty-six months through May 28 this year, totaling about ¥1.4 trillion.

Initially, repayments were to start at the end of March last year, but there have already been two postponements because of a lack of improvement in the pandemic situation.

In a health ministry survey released in March on 906 municipalities with social welfare offices, 495 of the 536 that submitted responses — over 90% — were concerned that many people would be unable to repay the loans when the repayments start.

A social welfare council in Sumida Ward, Tokyo, has received many inquiries from borrowers worried about repayments since spring. During the peak in March last year, there were about 100 loan applications per day. “Providing the loans was the priority at the time, we couldn’t even offer them counseling about some of the things happening in their lives,” a senior welfare official said.

Many applications received by the social welfare council in Kawagoe, Saitama Prefecture, were from foreign residents, but some of them had already moved out from the city. “Cases in which foreign borrowers return to their home countries without paying back the money may increase,” a welfare official said.

The central government does not plan to postpone the repayment schedule for a third time. “We’ve moved to the stage in which support should be provided to help people become financially independent,” a senior health ministry official said.

A panel of experts began discussions this month on obligating local governments to have a support system in place for people in need, including those who borrowed the loans. Instructions on managing household finances and support for finding employment are among the measures being discussed.

“Promptly providing the loans was a necessary measure when infections were rapidly spreading, but it was expected from the beginning that many borrowers might have difficulty repaying the money,” said Yohei Kadosaki, who is an associate professor at Nihon Fukushi University and an expert on the welfare system. “There is an urgent need for measures to help needy households become financially independent from a long-term perspective, in case there is another surge of infections.”