By Tetsushi Kajimoto
TOKYO (Reuters) – Most Japanese corporations were disappointed by the government’s $1 trillion stimulus plan to mitigate the economic fallout from the coronavirus outbreak, saying it is insufficient, and many complained it was too little, too late, a Reuters poll showed.
Prime Minister Shinzo Abe last week declared a state of emergency for Tokyo and six other prefectures, and rolled out an economic stimulus package equal to 20% of economic output.
The 108 trillion yen ($1 trillion) package includes cash payouts worth more than 6 trillion yen to households and small and midsize firms.
The Reuters Corporate Survey found 46% of firms felt the government’s stimulus was somewhat not enough and 29% deemed it quite insufficient, keeping Abe’s government under pressure to top-up last week’s spending package. While 5% said it was too much, just 21% said it was sufficient and appropriate.
“The government lacks speed with which it responds to the needs of corporate financing. We want steps such as unconditional tax payment deferral,” a manager of a transport equipment maker wrote in the survey.
“Money must be directed towards individuals, but the amount was just a drop in the bucket,” wrote a machinery maker manager.
A wholesale manager wrote: “I don’t know how effective cash payouts will be. Bolder steps must be taken like sales tax cut.”
Asked what they want the government and the Bank of Japan to do, many firms chose steps to stimulate private consumption, facilitate corporate financing and boost employment subsidies — all of which were picked by some 40% of firms.
Analysts say the actual size of the package was exaggerated as it included non-spending items such as loans and tax payment delay. Excluding such factors, the new stimulus was much smaller.
“Of this package, fresh direct government spending that has an immediate effect is likely some 10 trillion yen,” said Hiroshi Ugai, chief economist at JPMorgan Securities Japan. “If this stimulus proves not enough, the government will be forced to deploy additional spending.”
Already, some ruling party lawmakers are calling for even bigger spending, which would further strain the industrial world’s worst debt burden at more than twice the size of its economy.
An overwhelming majority of firms said they would keep employment and base salaries at current levels, while many of those who were unsatisfied with the government’s stimulus called for more support for financing and hiring, the survey showed.
Some said they would slash one-off bonus payment and consider laying off workers depending on future developments.
“If the situation allows, we would be sure to consider pay cuts and layoffs,” a machinery maker manager wrote in the poll.
The Reuters Corporate Survey, conducted from April 1-13 for Reuters by Nikkei Research, canvassed 499 big and mid-size non-financial companies. Roughly 230 answered questions on the virus impact on condition of anonymity to express opinions freely.
Nearly 2 million people have been infected by the novel coronavirus globally and more than 120,500 have died. In Japan, rising coronavirus cases are piling pressure on an economy already on the cusp of recession.
In the survey, a majority of firms expected their output and sales to decline last month, with nine out of ten firms bracing for the pandemic’s impact to last several months or longer.
The Corporate Survey also found the virus is having a widespread impact, with 56% of firms reporting their sales and output were dented in March, up from 47% seen in the prior month.
About three-fifth of the companies said their supply chains have been hit, versus the previous month’s survey that found 47% of firms had been affected.
Three-fifth of firms saw no end to the pandemic for the foreseeable future and one-third said it would take several months for the coronavirus impact on their business to be resolved – a jump from a combined share of 65% in the prior month’s survey.
Three fourth of firms would implement only necessary minimum levels of capital spending this fiscal year while only a quarter would maintain or boost business expenditures, the poll showed.
If the pandemic is resolved, 80% would keep or boost investment.
A ceramics maker manager wrote: “To be honest, we want to defer investment. What’s urgent now is to keep business afloat.”
($1 = 107.0800 yen)
(Reporting by Tetsushi Kajimoto; Editing by Shri Navaratnam)