【Aging, safety net and fiscal crisis in Japan】No.218: The large disparity between prefectures in terms of financial resources for COVID-19

In this column series, Yukihiro Matsuyama, Research Director at CIGS introduces the latest information about aging, safety net and fiscal crisis in Japan with data of international comparison.

To prevent COVID-19 infection, it is necessary to suspend businesses for a certain amount of time, including restaurants, karaoke bars, live houses, and movie theaters where many people gather. The national government intends to utilize the employment adjustment subsidy program so that employers can pay leave allowances without having to dismiss their employees. However, small and medium-sized enterprises are in a position where they are likely to go bankrupt without an additional subsidy from the government, due to the heavy rent burden.

Therefore, the Tokyo Metropolitan Government has decided to pay money to employers who cooperate with the business suspension. The amount can be as small as JPY 500,000 (US$ 4,630) for an employer with one facility, and JPY 1 million (US$ 9,260) for an employer with two or more facilities; although these figures seem to be low, for an employer, it is better than nothing. At the same time , governors of other prefectures are considering similar compensation subsidies, although their implementation is difficult due to a lack of financial resources.

Such disparities between Tokyo and other prefectures is confirmed by the amount of Fiscal Adjustment Fund held by each. This reserve fund is intended to be used in the event of an unexpected situation, such as a natural disaster. The total amount of funds in all 47 prefectures was JPY 1,783 billion (US$ 16.5 billion) as of the end of March 2019, but as shown in Figure 1, prefectures other than Tokyo have a small balance.

Figure 1 Fiscal adjustment fund in prefectures with a high number of COVID-19 infections

20200519_matsuyama_218_fig01.png*Please click the table image to find the original size image.

(Source: Fiscal reports of prefectures)

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