Japan's ruling party calls for cash payouts to lift virus-hit consumer spending

By Yoshifumi Takemoto and Leika Kihara

TOKYO (Reuters) - Japan's economic stimulus package to mitigate the fallout from the coronavirus outbreak should include cash payouts and other measures that give a direct boost to consumption, a senior ruling party official said on Tuesday.

Hiroshige Seko, a senior official of Japan's ruling Liberal Democratic Party (LDP), also told reporters that a supplementary budget must be compiled in time to fund necessary steps before Japan's Golden Week holidays in early May.

"Several countries, mainly western economies, are coming up with sizable stimulus packages. Japan, on the other hand, has yet to compile one," Seko told a news conference.

"We need to think about how best to boost consumption, including handing out cash and coupons," he said, joining other ruling party lawmakers calling for big fiscal spending to ease the pain on the economy from the coronavirus outbreak.

Sources have told Reuters that Prime Minister Shinzo Abe's pledge of "huge" stimulus will involve spending of at least $137 billion financed in part by deficit-covering bonds.

Global travel bans, event cancellations and supply chain disruptions caused by the virus outbreak have added to woes for Japan's economy, which is on the cusp of recession.

Department store sales fell 12.2% in February from a year earlier, marking the fifth straight month of declines, due to a slump in inbound tourists and domestic shoppers, industry data showed on Tuesday.

The Japanese government's economic assessment in March is expected to be its bleakest in nearly seven years as the outbreak takes the wind out of consumer spending and business sentiment, the Nikkei reported on Tuesday.

Prime Minister Shinzo Abe also conceded for the first time on Monday that the Tokyo Olympic Games could be postponed due to the virus outbreak - a move analysts say would further hurt business and household sentiment.

Economy minister Yasutoshi Nishimura said on Tuesday a postponement will likely affect "everyone's sentiment" in Japan.

"We need to scrutinise how an expected slump in overseas visitors could affect Japan's economy," he told reporters.

(Reporting by Yoshifumi Takemoto, Leika Kihara, Kaori Kaneko and Hiroko Hamada; Writing by Leika Kihara; Editing by Chang-Ran Kim and Edwina Gibbs)