Need To Know: April 12

Post-Abe Positioning

A power struggle in Japan over a stimulus package for Covid-19 shows politicians in the ruling Liberal Democratic Party jockeying for the post-Shinzo Abe era.

Cabinet approved on Tuesday a record-breaking ¥108 trillion (US$ 988 billion) emergency injection for the nation’s battered economy. More on the devastation next.

Carnage ….

The fundamental elements of the government’s plan come from proposals spearheaded by the LDP’s policy research council chairman Fumio Kishida, who is also seen as a frontrunner to succeed Prime Minister Abe. Abe has lead Japan for the second time around since 2012.

Japan will provide ¥300,000 (US$ 2,765) to poor households and those where incomes have been halved due to the virus outbreak. It is projected that the number of eligible households will be 13 million out of about 53 million.

But Kishida had wanted a cash handout on on a much larger scale: to every household at ¥100,000 (US$ 921) per person.

Politically, if you want to make your poll numbers pop, giving everyone cash is a great way to to it.

However, Kishida’s plan pitted him against lawmakers with deep ties to the agricultural industry. They preferred to give households vouchers for meat and fish, sales of which usually fall during slowdowns. Those industries are part of the LDP’s core base in the countryside. They also argued that people would not spend the distributed cash and instead save it.

Two of Kishida’s LDP heavyweight rivals who preferred the vouchers over a universal cash payment: Deputy Prime Minister and Finance Minister Taro Aso and LDP Secretary-General Toshihiro Nikai.

Interesting to note Aso, who became the prime minister shortly after Lehman Brothers collapsed in 2008, then distributed around ¥12,000 to every citizen to boost the economy.

In the end, Abe decided on payments to those most severely affected and added a plan to protect employment by supporting $240 billion in interest-free loans, and offering a grace period for payment of national taxes to help ailing businesses.

Despite Stimulus Japanese economy expected to contract 25%

The reason for that record stimulus package?

Japan’s economy is heading toward a record contraction of 25 percent this quarter according to Goldman Sachs. Goldman also sees exports plunging 60 percent in the quarter.

The forecast is the latest dismal assessment as economic activity is scaled back due to Covid-19 and a state of emergency now exists in areas covering almost half of the nation’s output.

Rescheduling of the 2020 Olympics in Tokyo is estimated to have cost US$ 6 billion alone. There are no annual estimates yet on the impact on tourism in general, one of the bright lights in the Japanese economy over the last decade. But in February, the number of foreign nationals who entered Japan was below one million. The last time foreign visitor arrivals were below one million in a single month was six years ago.

South Korean Visa Retaliation

Keeping an eye on this because it could point to a post-virus world where travel restrictions could be the new norm.

South Korea announced it will halt visa-free entry and visa waiver programs for countries that have barred the entry of South Koreans over coronavirus concerns.

The suspension of visa-free entry does not at all represent a ban on arrivals from those countries as those who obtain formal visas can still enter South Korea.

The decision will be applied to 88 countries, including Canada and Australia. The United States will not be affected as the country is still allowing South Koreans to enter.

China is not subject to the planned visa suspension as there is no visa-free agreement or program in place between the two countries.