TOKYO (Reuters) - Japan on Tuesday announced a second package of measures worth about $4 billion in spending to cope with the fallout to the economy of the coronavirus outbreak, focusing on support for small and mid-sized firms.

An employee, wearing protective face mask following an outbreak of the coronavirus disease (COVID-19), offers food outside a restaurant on an almost empty street in Yokohama’s Chinatown, south of Tokyo, Japan March 10, 2020. REUTERS/Edgard Garrido

The package, totalling 430.8 billion yen ($4.1 billion) in spending, shows how much pressure policymakers are under to bolster fragile growth and stem the risk of corporate bankruptcies, as event cancellations and a slump in tourism threaten to hit the broader economy hard.

To help fund the package, the government will tap the rest of this fiscal year’s budget reserve of about 270 billion yen, Prime Minister Shinzo Abe said.

“I’ll carry out necessary and sufficient economic and fiscal management without hesitation or delay, while fully ascertaining economic moves and effects on the people’s livelihoods from now on as well,” Abe said at the end of a meeting of the government’s economic advisory council.

The move is likely to affect what the Bank of Japan decides 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.

Finance Minister Taro Aso said on Tuesday there was no need yet for a bigger extra budget, adding that the fallout from the outbreak so far had not reached the scale of the 2009 financial crisis.

“We need to ascertain the current situation,” Aso told reporters after a cabinet meeting. If was not yet clear if the government needed an extra budget, he said.

FINANCIAL SUPPORT

As well as support for businesses, the new package will fund improvements to medical facilities, ease the supply and demand of masks, promote working from home, and provide subsidies to working parents who must take leave because of closed schools.

Aso said financing will focus on small and tiny businesses in need of financing over the next two to three weeks.

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 1.6 trillion yen in special financing for small- and mid-size firms hit by the virus, Abe said, up from about 500 billion yen previously announced.

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Reuters first reported the second package’s size earlier on Tuesday and the financing on Monday.

As part of the second package, Abe has said a government-affiliated lender would offer funds effectively at no interest and without collateral to small firms whose sales slumped amid the outbreak.

The virus has infected more than 111,000 people and killed more than 4,000 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. [MKTS/GLOB]