Features
8 Apr 20

Japan: State of Emergency and Economic Stimulus

Japan has registered a relatively low number of corona cases until now (3.906 cases with 92 deaths, source Johns Hopkins, 07/04/2020), but as the daily number of infections has started to surge, Prime Minister Abe has declared a state of emergency that will cover most of the populous cities in response to an increased risk of mass infection.

State of Emergency

As Japan has no legislative or regulatory support to implement lockdowns as seen in Europe, the Government had to extend the scope of a law initially designed for heavy flu outbreaks. The law gives local (prefectural) authorities the possibility to shut down some of the businesses and services, but does not reach as far as massive, nationwide shutdowns.

Abe had the option to declare a state of emergency as soon as from March but has pushed it forward as long as he possible could to maintain individual rights. Pressure on the Government, however, escalated gradually as the number of daily infections rose – especially after the death of a famous comedian due to the coronavirus, which seemed to have alarmed public opinion.

Economic Stimulus

The pandemic had already hit business hard in Japan. The Japan Center for Economic Research calculated the impact on GDP as much as 0.5% per month for Tokyo alone. All of Japan’s export sectors (electronics and cars) have suffered from either production or sales stops.

In order to stimulate the economy, Abe has therefore announced a USD 1 trillion package to help families and local businesses. Families and small/medium sized businesses will be receiving grants up to 2 million Yen ($18.350) to compensate for loss of income due to the pandemic. In addition, the Government might allow tax declaration to be extended or 0% credit lines to be made accessible for SMEs.

A big part of the stimulus will be allocated to boost demand in the tourism, transportation, event and restaurant business, once the outbreak is contained.

What’s next?

Practically, local authorities will ask schools, care centers, gyms, pools, night clubs, hotels… to suspend operations. Supermarkets and other essential services – included public transport – will remain operational, but might restrict services.

No specific regulations have been issued for businesses. Notwithstanding their modern image, most of Japanese businesses work in a very traditional manner that involves face-to-face meetings, lots of paperwork and stamps. Only about 20% of the Japanese companies has an infrastructure that allows employees to work from home.

Japan hopes that state of emergency will contain as much as possible the number of infections that require normal hospitalization or patients becoming severely ill and needing intensive care. Japan, 126.8 million people, counts 6.500 ICUs of which about a 1000 are reserved for corona patients; for comparison, Belgium, with a population of 11.5 million people, has made 2.293 ICUs available.   

Authored by: Yves Helven