One of the government’s countermeasures to address the economic hardship caused by COVID-19 was interest-free loans, called tokurei kashitsuke, for households whose income had dropped appeciably due to the pandemic. Though these kinds of loans have always been available, the conditions were eased in order to allow a wider cross-section of people to apply for them. Applicants could borrow up to ¥2 million at one time without the need of a guarantor. The new loan processing regime started in March 2020 and the final application period ended in September of this year. The total number of loans approved through the end of August was 3.35 million for a total of ¥1.43 trillion.
According to the Asahi Shimbun, about 2.6 million loan recipients will be required to start paying them back in January. (Recipients could start paying the loans back at any time, and some people have already started.) There is apparently concern that many of these recipients will not be able to pay back the loans any time soon, and the government has been accepting applications to have the payback period postponed or even cancelled. Actually, the government had already postponed the payback deadline several times since the special loan was implemented, but now, with the January deadline being finalized, they have to address the reality that many household that received the loans remain in financially straitened circumstances. It has already been confirmed that about 7,500 loan recipients have declared bankruptcy (1,247 of them in Tokyo), and about 30 percent—representing a total of 791,000 loans—have so far applied to have them forgiven.
Asahi calculated these numbers by surveying the prefectural social welfare councils that administer the loans. In fact, of these 315,000 loans have already been cleared for exemption owing to the streamlined application and review process. When the COVID loan scheme went into effect, the government realized it had to make the appication process smoother so that households could receive funds as quickly as possible—essentially, they only asked applicants to submit documents showing how their income had decreased or would decrease. The same goes for the loan exemption applications. In order to qualify for the exemption, the recipient has to provide proof that they don’t make enough income to pay local taxes.
The local governments, as well as the central government, assumes that a lot more households will be applying for the exemption in coming weeks. Among the prefectures, Aomori has the highest rate of applicants for exemptions—so far 45 percent of loan recipients have applied. The largest group of loan recipients asking for exemptions nationwide has been self-employed people, since they still haven’t recovered work even as COVID-related restrictions are eased or eliminated. Another problem that needs immediate attention, according to Asahi’s survey, is that local councils are sorely over-extended. The volume of loans and the number of recipients applying for exemptions has placed an incredible burden on the civil servants in charge of the program. Asahi says that 18.1 percent of involved staff have quit their jobs this year. In comparison, the turnover rate for equivalent workers in 2019 was 7.8 percent.