Daily Management Review

Ire Over Japanese PM’s $94b Reserve Fund To Combat Pandemic


Ire Over Japanese PM’s $94b Reserve Fund To Combat Pandemic
Opposition law makers of Japan have labeled the $94 billion emergency fund earmarked for as relief package for Covid-19, and which can be availed without any permission from the parliament of the country, as Japanese Prime Minister Shinzo Abe's "pocket money". The lawmakers are also concerned about the unprecedented size of the financial package.
The 10 trillion yen ($94 billion) fund will allow the Japanese government to quickly address the economic impact of the novel coronavirus pandemic in the country, Abe has said, while describing the pandemic crisis as a "once in a century crisis" that has almost devastated the Japanese economy.
"We'll report to parliament how we spend the money as needed and at the appropriate time," Abe told parliament on Friday.
But even bureaucrats who have the power to decide on how to spend the money have raised questions about the fund which is 20 times larger than a typical fund size that is kept as a reserve. This fund is equivalent to the combined spending of the country on education and defence.
According to reports, a finance ministry official described he huge size of the fund as: "it's awful."
"It's a huge blank cheque that would leave Japan with a bad precedent," said the official, who spoke on condition of anonymity to speak to the media. The fund is set to be approved through the Japanese parliament which is part of the second $1.1 trillion economic stimulus package of the country.
The reactions to the huge size of the fund reflects how Abe, who has been under pressure to match the huge coronavirus related economic stimulus announced by other major economies, has tinkered with taxpayers’ money for a country that has one of the highest national debts in the world.
"Lawmakers of Abe's ruling party wanted a magical wallet and thought they can get one because we're in a crisis," said independent political affairs analyst Atsuo Ito. "Fiscal reform has become a distant goal... The cost of big spending will fall upon the next generation."
But since it is necessary to also guard for a possible second wave of the pandemic, therefore the size of the fund is justified, argue some analysts.
"You need huge sums in reserve when you're dealing with so much unpredictability. You need to be ready for emergencies," said Yasuhide Yajima, chief economist at NLI Research Institute.
In order to provide relief for disaster and other unexpected costs, the Japanese government typically reserve funds worth several hundred billion yen in its annual budgets. The power to decide on how to spend the money rests solely with the government and reports are needed to be filed with the parliament only after spending the money from the funds. But since such funds are an exception to a constitutional rule that mandates budgetary spending to receive prior approval by parliament, such funds are typically kept small in size.
But even in good times Japan has struggled to reduce spending. The country is currently the highest indebted among all industrialized nations of the world.  The current debt of the country is almost twice the size of its $5 trillion economy.