The number of infections is also rising again in Japan. Even so, the country could recover from the economic fallout from the pandemic much faster than America and Europe.

A couple crosses a zebra crossing in Tokyo.

Dhe Japanese government is once again running into more debt in order to use an economic stimulus package to mitigate the economic threats posed by the coronavirus pandemic. The total stimulus will total 73.6 trillion yen (584 billion euros). As is customary in Japan, this figure includes all possible calculated stimulus effects. The pure fiscal expenditure incurred by the government is said to amount to around 40 trillion yen (317 billion euros).

Japanese Prime Minister Yoshihide Suga announced on Tuesday that the government wanted to secure employment, keep companies in business and revitalize the economy.

In contrast to the first two Corona economic stimulus packages in spring, however, a considerable part of the expenditure is now aimed at promoting digitization and environmentally friendly technologies in the post-Corona world. Suga aims to develop the country towards carbon neutrality by 2050. The government will provide 2 trillion yen over ten years as a boost to the hydrogen energy industry.

2000 infections a day

The cornerstones of the economic stimulus package, which will not pass through parliament until next year, are a response to the third wave of infections that is currently rolling through Japan. The number of new infections has risen to more than 2000 a day. Compared to western countries this is still not much, but in Japan the situation is increasingly becoming a threat to the health system. The prefectures of Hokkaido and Osaka have already asked the government to send more nurses.

The government is earmarking around 6 trillion yen to fight the virus and improve medical care. Companies should receive financial support longer if they keep their employees. The subsidy program to promote domestic tourism is to be extended until the end of June.

Many Japanese see the tourism program as one of the reasons that the virus is so widespread in the third wave. But with a few exceptions, the government has so far been reluctant to suspend the promotion of domestic tourism and gastronomy. The displeasure about this is one of the reasons that Prime Minister Suga and his cabinet clearly lose out in the opinion polls.

The chances of a significant recovery in the coming year are not bad. In 2020, Japan’s economy is likely to shrink by a little more than 5 percent. In a Bloomberg survey, however, the analysts expect an average growth of 2.6 percent for 2021. Some are even more confident. The economists at Capital Economics are forecasting growth of 3.7 percent. Japan’s gross domestic product (GDP) will have reached pre-Corona levels as early as the third quarter of next year, it is said, faster than the United States and far faster than the euro area.

Capital Economics estimates that Japan with all three stimulus packages will provide a direct fiscal stimulus of around 12 percent of GDP. That corresponds roughly to the fiscal support in Germany or Canada.