Japan’s ruling coalition executives have agreed to urge the government to compile a supplementary budget over the coronavirus as reported by the Nikkei.
Casting minds back, we saw Japan’s ruling coalition executives seek spending sized at 10 trillion yen ($92.20 billion), to pay for costs for disaster relief from a string of typhoons that struck Japan in 2019.
Meanwhile, the current fiscal stimulus programme offsets the negative impact of last year’s 2% consumption tax hike and something more needs to be done to change the overall growth picture as a technical downturn, from evolving into a full-blown recession seems unavoidable following the -6% GDP for the fourth quarter. The full-year GDP growth for 2020 is being sen at -1.1%.
FX implications
The yen is now being questioned for its safe-haven status following the drop across the board (USD/JPY broke above the 112 level as recession fears rise) even as the heightened risks surrounding the spread of the virus kicked in and played havoc on risk appetite, sending gold off to the highest levels since 2013. Speculation around large financial outflows from Japan had contributed to the move and should the economy tank, as expected, we could see more of the same, especially as the world floods into the US dollar in the case of an official pandemic announcement by the WHO.
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