Bank of Ja­pan ex­pands eas­ing mea­sures, cuts growth fore­cast

Ja­pan econ­omy grap­ples with fall­out from pan­demic

Kuwait Times - - Business -

TOKYO: The Bank of Ja­pan yes­ter­day ramped up its emer­gency mon­e­tary eas­ing and cut growth fore­casts for the world’s third largest econ­omy, as the coro­n­avirus pan­demic rav­ages the globe.

Af­ter a meet­ing short­ened from two days to one, the cen­tral bank said it would shift to un­lim­ited gov­ern­ment bond buy­ing and more than dou­ble its ca­pac­ity to pur­chase cor­po­rate bonds and com­mer­cial pa­pers-a move to sup­port Ja­pan Inc’s fi­nanc­ing as the coun­try grap­ples with fall­out from the virus. The an­nounce­ment comes as cen­tral banks around the world re­vert to ex­tra­or­di­nary mea­sures-in hand with tril­lions of dol­lars of gov­ern­ment stim­u­lus-to sup­port their economies, which have been rav­aged by lon­grun­ning lock­downs aimed at pre­vent­ing the spread of the dis­ease.

An­a­lysts said the an­nounce­ment was ap­pro­pri­ate but were gloomy on the prospects of suc­cess.

The move is “largely sym­bolic, but it’s bet­ter than do­ing noth­ing”, Taro Saito, se­nior econ­o­mist at NLI Re­search In­sti­tute, told AFP ahead of the de­ci­sion. “Given the cir­cum­stances, no one ex­pects the lat­est pol­icy can turn the econ­omy around, and the same can be said about fis­cal stim­u­lus,” he said.

Even be­fore lift­ing the 80 tril­lion yen cap on gov­ern­ment bond buy­ing, the BoJ’s pur­chases were well be­low the ceil­ing, Saito noted. In a quar­terly eco­nomic re­port is­sued yes­ter­day, the bank also re­vised down growth fore­casts for the world’s third largest econ­omy. For the cur­rent fis­cal year to March 2021, it now fore­casts the econ­omy will shrink 3.0-5.0 per­cent, com­pared with the pre­vi­ous es­ti­mate of 0.8-1.1 per­cent growth.

For the past year to last month, the BoJ es­ti­mates the econ­omy shrank 0.1 per­cent to 0.4 per­cent, com­pared with the pre­vi­ously es­ti­mated 0.8-0.9 per­cent growth. How­ever, it re­vised up the fore­cast for fis­cal year to March 2022, now es­ti­mat­ing growth of 2.8-3.9 per­cent, against a pre­vi­ous es­ti­mate of 1.0-1.3 per­cent ex­pan­sion.

BoJ to shift to un­lim­ited bond buy­ing

‘In­creas­ingly se­vere sit­u­a­tion’

“Ja­pan’s econ­omy has been in an in­creas­ingly se­vere sit­u­a­tion due to the im­pact of the spread of the novel coro­n­avirus at home and abroad,” the bank said in a state­ment. “Fi­nan­cial con­di­tions have been less ac­com­moda­tive in terms of cor­po­rate fi­nanc­ing, as seen in de­te­ri­o­ra­tion in firms’ fi­nan­cial po­si­tions,” it added.

It said its “cur­rent pow­er­ful mon­e­tary eas­ing mea­sures... will con­trib­ute to sup­port­ing eco­nomic and fi­nan­cial ac­tiv­i­ties”, along with mea­sures taken by gov­ern­ments at home and abroad to tackle the pan­demic. The cen­tral bank left rates un­changed and also re­it­er­ated its long­stand­ing com­mit­ment to a two per­cent in­fla­tion tar­get, which has re­mained stub­bornly elu­sive.

But it re­vised down its fore­cast for core con­sumer prices, which ex­clude fresh food, now es­ti­mat­ing the fis­cal year to March 2021 will see the prices fall­ing be­tween 0.3 per­cent and 0.7 per­cent on-year, against rises of 1.0-1.1 per­cent in the pre­vi­ous es­ti­mate. The cen­tral bank’s de­ci­sions come ahead of the US Fed­eral Re­serve’s meet­ing later this week to shore up con­fi­dence and keep the fi­nan­cial sec­tor run­ning. The Fed has al­ready un­veiled mea­sures to bol­ster liquidity and cut in­ter­est rates to his­toric near-zero as the coro­n­avirus slammed the US econ­omy, so it is not ex­pected to do much be­sides project con­fi­dence at its pol­icy meet­ing this week, an­a­lysts have said. Prime Min­is­ter Shinzo Abe’s gov­ern­ment last month un­veiled a pack­age of stim­u­lus mea­sures worth around $1 tril­lion to pro­tect jobs, bol­ster the med­i­cal sec­tor and ease the pain for work­ing fam­i­lies. Ear­lier this month, Abe said the gov­ern­ment will of­fer a cash pay­ment of 100,000 yen ($930) to ev­ery res­i­dent.

“Ja­pan’s econ­omy is likely to re­main in a se­vere sit­u­a­tion for the time be­ing due to the im­pact of” the virus, the BoJ said in its quar­terly re­port. But “there­after, as the im­pact of the spread of the COVID-19 wanes at home and abroad, Ja­pan’s econ­omy is likely to im­prove, sup­ported by ac­com­moda­tive fi­nan­cial con­di­tions and the gov­ern­ment’s eco­nomic mea­sures”, it added.

— AFP

TOKYO: The Bank of Ja­pan said it would shift to un­lim­ited gov­ern­ment bond buy­ing and more than dou­ble its ca­pac­ity to pur­chase cor­po­rate bonds and com­mer­cial pa­pers—a move to sup­port Ja­pan Inc’s fi­nanc­ing as the coun­try grap­ples with fall­out from the virus.

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