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BOJ voices concerns over possibility of prolonged coronavirus impact

  • March 25, 2020
  • , Kyodo News , 1:27 p.m.
  • English Press

TOKYO — Bank of Japan policymakers voiced serious concerns about the prospect the coronavirus crisis will have a prolonged impact on the country’s economy and cause a tightening in corporate financing, a summary of their opinions from their latest meeting showed Wednesday.


With rapidly growing fears over the global spread of the pneumonia-causing virus, the nine-member Policy Board shared a view at the March 16 meeting that a long-lasting coronavirus outbreak would possibly deal a harsh blow to the Japanese economy.


“As there are high uncertainties, it is necessary to keep in mind that the impact of COVID-19 can be significant and not just temporary,” one of the members said, according to a translation provided by the BOJ.


Another member said, “An economic downturn can be serious and prolonged based on such measures as for public health taken by each country, including movement restrictions,” adding the global outbreak of COVID-19 has put “strong downward pressure” on Japan’s economy.


Board members also expressed concerns over corporate financing as many companies are facing a cash shortage due to falling earnings while financial institutions may be reluctant to lend money amid uncertainties over the levels of available liquidity.


“The high-priority issues for the time being are to provide ample funds and sufficiently facilitate corporate financing in terms of the financial positions,” said one of the BOJ’s members.


As part of efforts to provide sufficient liquidity into markets, the Policy Board decided at last week’s meeting to employ a new operation to provide loans against corporate debt of about 8 trillion yen as collateral at the interest rate of zero percent.


“The Special Funds-Supplying Operations…will encourage financial institutions to actively facilitate financing of their client firms,” a board member said, adding such a measure will alleviate the anxiety of business managers whose firms are experiencing a deterioration in their financial positions.


The BOJ also decided to expand its asset purchase program in a bid to stabilize financial markets, as it increased its annual target of exchange-traded fund buying to 12 trillion yen ($108 billion) from 6 trillion yen while boosting purchases of commercial paper and corporate bond.


One board member expressed hope that the government will address this situation “on a large scale” as many people’s job opportunities and income have decreased against the background of various measures necessary for responding to the virus infections.


The summary of opinions is compiled by Governor Haruhiko Kuroda and does not attribute any comments to individual speakers.

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