Tokyo, May 14 (Jiji Press)–Bank of Japan Governor Haruhiko Kuroda on Thursday stressed the central bank’s resolve to do anything it can to contain the economic and financial impacts of the novel coronavirus pandemic.
In an online lecture hosted by the Research Institute of Japan, a Jiji Press affiliate, Kuroda cited “deterioration in financial positions of large firms, as well as small and medium-sized ones” due to falling sales and profits amid the epidemic.
“With the economy in an increasingly severe situation, the stress on the financial system has been growing in Japan, and it is necessary to pay further attention to the circumstances,” he added, warning against the possibility of banks’ financial soundness getting hurt by deteriorating corporate earnings and the financial system becoming incapable of playing its function as a result.
“The top-priority task for the time being is to contain the spread” of the coronavirus “as soon as possible and protect employment, businesses, and people’s livelihoods until that happens,” he said.
In the meantime, the BOJ will try to “ensure smooth financing and maintain stability in financial markets,” and to this end, it is “determined to do whatever” it can as a central bank while firmly cooperating with the government and foreign authorities, Kuroda said.
Kuroda reiterated that the central bank “will not hesitate to take additional easing measures if necessary” to shore up economic and financial activities.
The governor said that 74 financial institutions have begun to use a scheme aimed at facilitating corporate financing, which is part of the BOJ’s additional monetary easing steps introduced in April.
He added that some major banks have procured financial resources through the scheme to establish funds for lending working capital.
But it is “difficult to project the impact of constrained economic activity, which differs from a typical economic downturn,” Kuroda said of the effects of the coronavirus pandemic. “Moreover, there are uncertainties over the pace of economic improvement” after the spread of the virus subsides, he said.
In its latest quarterly Outlook for Economic Activity and Prices report, released in April, the BOJ forecast Japan’s consumer price growth in fiscal 2022 at 0.4-1.0 pct.
With this in mind, Kuroda said “it is likely to take an extended period of time,” beyond the projection period, for the BOJ to achieve its inflation goal of 2 pct.