Photo/Illutration This document shows how to apply for an exemption on repayment of special government COVID loans to households. (Takashi Kiyokawa)

With special government COVID loans starting to come due in January, close to 1 million households have applied for an exemption on repayments because they cannot make the monthly repayments.

A national study by The Asahi Shimbun found that about a third of those with loans who have until next March to apply for loan repayment exemptions have done so.

And the figure could increase as more people realize their finances will not allow them to make the repayments, which will start from January.

The special loan program was designed for households that suffered a loss in income due to the protracted COVID-19 pandemic.

Applicants only had to submit documents that showed a drop in income to receive the loan. At one time, households could receive up to 2 million yen ($13,700) in interest-free special loans that did not require a guarantor.

The program began in March 2020 and the deadline for loan applications was Sept. 30.

There were about 3.35 million loans made totaling about 1.43 trillion yen.

So far, about 791,000 applications have requested an exemption on repaying the loans. That is about a third of the total of about 2.57 million loans on which a decision to grant an exemption will be made　by next March. 

Exemptions have been approved for about 315,000 cases on which the total amount is about 104.7 billion yen.

And although full-scale loan repayments have not yet begun, about 7,500 individuals have filed for bankruptcy.

In general, if the head of the household and the individual who took out the special loan can show their income is below the level that requires payment of local residential taxes, repayment of the special loan is exempted.

But some individuals who pay local residential taxes find their economic situation in dire straits due to the uncertainties still in place from the novel coronavirus pandemic. 

For example, a woman in her 50s living in Saitama Prefecture called the local social welfare council this spring and asked for an exemption because her financial situation was bleak even though she paid local residential taxes.

But the person who took the call only suggested that she try again in January when loan repayments begin.

She turned to the special loan program when she lost her job during the pandemic and borrowed a total of 1.1 million yen.

Her monthly income continues to be unstable. While there are months when she earns more than 200,000 yen, there are some months when that income falls to between 120,000 yen and 130,000 yen because she is suddenly let go from a part-time job.

Single and without children, the woman lives in an apartment with a monthly rent of 60,000 yen. In addition, she has to pay 45,000 yen a month to pay past-due credit card bills. Another 25,000 yen a month goes to pay national health insurance premiums and past-due local residential taxes.

From January, the woman will have to come up with about 10,000 yen a month to repay the special loan.

“I am really worried because my life only keeps getting worse,” she said. “While I want to try my best to repay the loan, I cannot ignore the possibility that I might end up bankrupt.”

Meanwhile, the Japan Federation of Bar Associations on Oct. 6 called on the government to vastly expand the range for which exemptions on loan repayments can be made.

The federation blasted the government for instituting the special loan program because it forces households with severe financial difficulties to have to repay large loans over an extended period. 

(This article was written by Takashi Kiyokawa, a senior staff writer, and Yasusaburo Nakamura, Tomoe Ishikawa and Ryuichi Hisanaga.)

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