The Japanese Court of Auditors has found that around 468.5 billion yen (approx. 2.8 billion euros) in interest-free Corona loans that the government gave to low-income households during the pandemic are uncollectible.
This amount could rise as the government continues to write off loans for low-income households. It is currently processing around 140,000 applications for repayment waiver.
Corona loans as support for low-income households
The Corona loans included temporary emergency microloans and general financial assistance for daily living needs. Households could receive up to 2 million yen (approx. 12,188 euros). Unlike the government’s existing low-interest loans, the criteria were less stringent and no financial independence plan was required due to the need for a rapid response to the pandemic.
From March 2020 to September 2022, the Japanese government approved a total of 3.82 million applications for the loans. The repayments began in January 2023. The Court of Auditors found that the repayment was waived in 1.31 million cases (as of the end of March this year).
The Welfare Ministry, which administers the program, said the government has collected repayment for 1.91 million loans worth 661.4 billion yen (about 4 billion euros). However, there were deferrals due to unemployment and arrears. By the end of August 2024, 140,000 applications for repayment waiver had been submitted.
The repayment of loans worth 313.3 billion yen (approx. 2 billion euros) is scheduled to begin in January 2024. A spokesman for the ministry’s community welfare department said: “We don’t know how much we will be able to collect. We want to make sure we follow up with those who have been exempted from repayment.”
Many companies are also unable to repay loans
Not only is the Japanese government struggling to repay households’ coronavirus loans, but many companies are also unable to repay the loans received during the pandemic. In November 2023, bad loans totaled 69.7 billion yen (approx. 424.5 million euros).
The report noted that many small businesses have declared bankruptcy or are unable to make payments due to inflationary pressures.
