Financial stimulus seems to be the weapon of choice against virus-related economic drawdown

Financial stimulus seems to be the weapon of choice against virus-related economic drawdown

The pandemic is now the “biggest crisis” the global economy encountered since World War II. Yesterday, the Japanese Prime Minister Shinzo Abe declared a state of emergency.

The state of emergency will last until May 6, but it won't be nationwide, as only the capital and six prefectures are included. "Although a state of emergency is declared, it won't mean a city lockdown as seen overseas," Abe said. Almost 44% of Japan’s population will be part of this.

A stimulus package worth $990 billion was also approved yesterday by the government. The stimulus represents 20% of Japan’s GDP, as much as the local GDP of Tokyo.

In absolute percentage terms, it is bigger than the U.S. one, which accounts for 11% of its GDP, and also more significant than the German one, which weighs-in at 5%. The fiscal spending is also higher, at 7% of the economy.

Japan will sell bonds worth more than 18 trillion Yen to gather up money for funding the package.

The Minister of Agriculture, Forestry, and Fisheries called on people "to buy only what they need when they need it as there is sufficient food supply and no suspension is planned at food factories."

Analysts forecast that the economy will shrink over the next two quarters, and another stimulus will be necessary to get the economy going.

No penalties will be applied if the requests are not respected, as the governors are relying on peer pressure and respect for authority. No restrictions are involved when buying groceries and medicine. Moreover, Abe said that rail companies would not reduce the number of operational trains. Also, no roads will be blocked, and public transportation will run as usual.

Nationwide, there are over 4,000 cases recorded, with 93 deaths reported by Monday. Eighty more cases emerged Tuesday, and in Tokyo, the number of infections doubled in just one week to 1,200.

Abe declared that people suffering from mild symptoms would be taken care of in hotels and other facilities, including the ones that athletes and various were supposed to use during the postponed Olympic Games.

The number of tests will also increase, as well as the number of available beds and ventilators.


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Sources: cnbc.com, reuters.com, channelnewsasia.com

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The information presented herein is prepared by CAPEX.com and does not intend to constitute Investment Advice. The information herein is provided as a general marketing communication for information purposes only and as such it has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.

Therefore, Key Way Investments Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance is not a reliable indicator of future results.