* 430.8 bln yen package focuses on financing for small firms
* Finmin says no need yet for extra budget
* BOJ may take steps this month to ensure financing
Japan will unveil on Tuesday a second package of measures to offset the impact of a coronavirus outbreak, focusing on support for small businesses, Finance Minister Taro Aso said, as concerns mount about risks to the fragile economy.
However, Aso said there was no need yet for a bigger extra budget, since the fallout was not so widespread as that of the 2009 financial crisis, despite politicians' growing calls for large fiscal spending.
To help fund the package of 430.8 billion yen ($4.1 billion), the government will tap the rest of this fiscal year's budget reserve of about 270 billion yen, two sources with direct knowledge of the matter told Reuters.
The package underscores the pressure on policymakers to shore up fragile growth and stem the risk of corporate bankruptcies, as event cancellations and a tourism slump threaten to hit the economy hard.
The move is likely to affect the Bank of Japan's decision on steps to underpin the economy at its March 18-19 policy review.
The central bank will aim to ensure that companies hit by the virus outbreak do not face a financial squeeze before the end of the current fiscal year in March, Reuters has reported.
‘We need to ascertain the current situation,’ Aso told reporters after a cabinet meeting, adding ‘There's no saying’ whether the government needs an extra budget.
FINANCIAL SUPPORT
As well as support for businesses, the new package will beef up medical facilities and provide subsidies to parents who must take leave because of closed schools, Aso said.
‘Financing will focus on small and tiny businesses which face the need of financing over the next two to three weeks,’ he said.
The financial watchdog has urged credit associations and regional banks to hold hearings with small businesses about their financial situation, he added.
Japan will boost to 1.6 trillion yen its special financing for small- and mid-size firms hit by the virus, up from about 500 billion yen previously announced, according to a government document seen by Reuters.
As part of the second package, Prime Minister Shinzo Abe has said a government-affiliated lender would offer funds effectively at no interest and without collateral to small firms whose sales slumped in the outbreak.
The virus has infected more than 111,000 people and killed more than 3,800 globally, with the accompanying economic disruption undermining Japan's export-led economy.
The world's third-largest economy shrank by the most since a 2014 sales tax hike in the quarter to December, intensifying fears of an economic downturn.
The outbreak comes at a critical time for Japan, shattering hopes of a gradual economic recovery fuelled by strong domestic demand just as it prepares to host the summer Olympic Games in July and August.
The epidemic has prompted heavy selling of riskier assets and a scramble into assets such as the yen, perceived as safe havens during times of financial distress.
