Japan is to boost the amount of government financial assistance for cash-strapped companies by Y37,000bn as part of a new economic stimulus package.
The increased assistance, which includes loan guarantees, loans by government-affiliated banks and funds to purchase corporate bonds, highlights the difficulty Japanese companies are having in meeting funding needs as the global economy worsens.
The new aid comes as corporate bankruptcies in March rose 14 per cent year-on-year to a six-year high of 1,537, according to Tokyo Shoko Research.
The government is to unveil on Friday details of the stimulus package, which seeks to meet the three objectives of easing the credit squeeze, providing a safety net for the unemployed and stimulating flagging consumer demand.
Ruling party officials told local media the package could reach Y15,000bn ($150bn, €113bn, £102bn), much larger than the Y10,000bn figure suggested earlier this week. The stimulus funds relate to actual spending, as distinct from the Y37, 000bn for companies which is mostly loan guarantees.
Under the proposed package, Japan will become the latest country to pay drivers to trade in old cars for more fuel-efficient ones, emulating “cash for clunkers” schemes that have revived sales in Europe. The industry ministry has secured Y370bn to fund the programme, say people familiar with the plan.
Car buyers would be paid up to Y250,000 to trade in vehicles aged 13 years or more, somewhat less than the €2,500 paid to German drivers under the most successful European scheme.
When combined with a tax break introduced on April 1 on petrol-electric hybrids and other ultra-low emission vehicles, the incentives could lift vehicle demand by 900,000 vehicles over a year, said an official at the Japan Automobile Manufacturers’ Association. That would be equal to 20 per cent of this year’s previously projected domestic vehicle sales of 4.3m vehicles.
The association estimates that 10m of the 80m cars on the roads are at least 13 years old, although the true number may be lower because some owners ditch their vehicles illegally or sell them to unlicensed exporters to get around government-imposed scrapping duties.
To stimulate consumption, a voucher system will be introduced to encourage consumers to trade in old electronics for newer, more environmentally friendly products. Consumers who buy such new products, will receive “eco action points”, which they can use toward additional purchases.
“With this plan, we can kill two birds with one stone – spur the penetration of environmentally friendly products and stimulate consumption,” said an official.
Get alerts on when a new story is published