BOJ’S Kuroda warns sec­ond-round ef­fect of COVID-19 may dent eco­nomic growth

Iran Daily - - Global Economy -

Bank of Ja­pan (BOJ) Gov­er­nor Haruhiko Kuroda said sec­on­dround ef­fects of the coro­n­avirus pan­demic could hurt the Ja­panese econ­omy “con­sid­er­ably”, signaling the bank’s readi­ness to ramp up stim­u­lus mea­sures again to cush­ion any blow from the cri­sis.

But in an on­line sem­i­nar on Fri­day Kuroda said the cen­tral bank saw no im­me­di­ate need to cut in­ter­est rates, and in­stead will fo­cus on eas­ing cor­po­rate fund­ing strains and sta­bi­liz­ing mar­kets with its lend­ing fa­cil­ity and as­set pur­chases, Reuters re­ported.

“Ja­pan’s econ­omy has been in an ex­tremely se­vere sit­u­a­tion ... In the sec­ond quar­ter, we’ll likely see con­sid­er­able neg­a­tive growth,” Kuroda said.

“At this mo­ment, we didn’t see the need to fur­ther lower the en­tire yield curve. Of course, if nec­es­sary we will do that. But now, we don’t think it’s nec­es­sary,” he said.

The BOJ eased pol­icy in March and April, mainly by boost­ing as­set buy­ing and cre­at­ing lend­ing schemes to chan­nel funds to com­pa­nies hit by the pan­demic. It has kept its in­ter­est-rate tar­gets un­changed.

Kuroda said he was “cau­tiously op­ti­mistic” that Ja­pan’s econ­omy will grad­u­ally re­cover from the sec­ond half of this year, al­low­ing the BOJ to scale back its cri­sis-re­sponse steps.

“Once the im­pact of COVID-19 on the econ­omy has sub­sided, the econ­omy starts to re­cover and comes back to a nor­mal growth path, then of course our ex­tra­or­di­nary mea­sures may be grad­u­ally cur­tailed,” Kuroda said.

“But then, we have to achieve our two per­cent in­fla­tion tar­get,” he said. “That’s un­likely to be met in the short run. The BOJ’S ex­panded bal­ance sheet would not be nor­mal­ized un­til two per­cent in­fla­tion is achieved.”

Un­der yield curve con­trol, the BOJ guides short-term rates at -0.1 per­cent and long-term yields around zero. It also in­tro­duced sev­eral cri­sis-re­sponse tools, in­clud­ing a lend­ing fa­cil­ity to ease fund­ing strains that ex­pires in March next year.

KIM KYUNG-HOON/REUTERS Bank of Ja­pan Gov­er­nor Haruhiko Kuroda

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