TOKYO — The Japanese government had provided more than 1.42 trillion yen (about $9.81 billion) in special interest-free loans to help combat the economic impact of the coronavirus pandemic as of September 24 this year, according to the Japanese National Board of Welfare Data. That’s more than 20 times the total lent in the aftermath of the 2008 global financial crisis.
The COVID-19 special loans, for which applications closed on September 30, have supported several million applicants for more than 2 and a half years, but questions remain about whether the aid is sufficient for beneficiaries to be able to rebuild their lives. It is also unclear how the government will support those in need as the start of loan repayments looms in January 2023.
Before the spread of the coronavirus, support for people in need was provided by Japan’s “welfare fund system”. This was originally aimed at low-income households, but a special provision was added in response to the coronavirus outbreak, and the system was quickly extended to cover people whose incomes have fallen due to the pandemic. A senior official from the Ministry of Social Affairs commented: “We were able to react quickly by using an existing system rather than creating a new one.
Under the Special Loan System, the upper limit for microcredit to cover the living expenses of struggling households has been raised from 100,000 yen to 200,000 yen (from approximately $690 to $1,380), and the maximum amount general support funds for daily living use has been increased from 600,000 yen (approximately $4,100) – a monthly payment of 200,000 yen for up to three months – to 1.8 million yen (approximately $12,400 ) for a family of two.
Since the pandemic was an emergency, the government allowed the use of self-declaration documents as proof of reduced income, and it did not rigidly require expected repayment plans, which were required before the pandemic. introduction of the new system. An official from Japan’s National Welfare Board, which handled the loans, said: “We were able to act quickly on one notice from the Ministry of Welfare.
From the start of special loans in March 2020 until September 24 this year, total loans reached approximately 1,424,200,000,000 yen. In total, about 3.34 million special loans were granted, including 1.61 million microloans and 1.73 million general support loans.
During the three years of the so-called “Lehman shock” (from fiscal year 2009 to fiscal year 2011) following the collapse of the American investment bank Lehman Brothers, the Japanese government granted 70.7 billion yen ($490 million) in special loans. As the economic crisis mainly affected the manufacturing sector, a simple comparison cannot be made, but the amount this time was around 20 times higher.
One of the factors that pushed the total up is that the loan application deadline was extended 10 times in parallel with the waves of COVID-19 infections. An official from the Ministry of Social Affairs revealed: “Last spring, there was talk within the ministry to suspend special loans, but the infections spread and the Prime Minister’s Office put a stop to this. Since the decision (to suspend loans) would affect low-income people. households, we were more cautious on the decision compared to the special measures on employment adaptation subsidies (to cover part of the compensation from companies for workers on leave).
However, amid a recent drop in coronavirus infections, the number of loan applications has declined and Health Minister Katsunobu Kato announced at a press conference on September 26 that special loans would be liquidated at the end of this month, saying there was a need to return to “a normal mode”.
However, due to the prolonged effects of the pandemic, some people went bankrupt even after getting the special loans.
A 31-year-old woman from Osaka Prefecture who lives with her husband and their baby daughter is one. She was working as a masseuse, but client numbers plummeted amid the pandemic, and then she found out she was pregnant. His shifts were cut in half, and his income fell from 250,000 yen (about $1,730) a month to just 150,000 yen (about $1,000).
Her husband was unemployed at one point, and although she tried to reduce the cost of meals to 500 yen a day, she could not even raise the 1,000 yen she needed to go to a OB-GYN clinic. She started using government microloans in June 2021, and by January this year she had borrowed 1.25 million yen.
She became able to live normally, but with clients continuing to stay away, she was effectively out of a job. It was difficult to find another one while she was pregnant, and the only other income she had was 10,000 to 20,000 yen (about $70 to $140) a month through part-time work. The 130,000 yen (about $900) a month that her husband brought home supported the family.
Special loans do not need to be repaid if the household is exempt from Council Tax, but the wife says this does not apply to her. Combined with a credit card loan of around 1.48 million yen ($10,200), the woman’s debt swelled to around 2.73 million yen ($18,900) and she filed for bankruptcy in July this year.
The proportion of bankruptcies among those who received special loans is not known, but according to the Tokyo Welfare Board, at least 1,247 people in Tokyo have started bankruptcy proceedings.
(Japanese original by Yuki Nakagawa, Lifestyle and Medical News Department)