BOJ braced for deeper economic trouble even after March easing

TOKYO,. The coronavirus pandemic could plunge Japan into prolonged economic gloom, Bank of Japan policymakers warned as they eased monetary policy last week, with one member flagging the chance of more stimulus, a summary of their debate at the March meeting showed.

The BOJ expanded monetary stimulus in an unscheduled policy meeting on March 16 to ease corporate funding strains and calm financial markets jolted by the health crisis.

A summary of opinions expressed at last week’s rate review showed the deep concern shared among the nine-member board over the huge blow the virus outbreak could inflict on an economy, already reeling from last year’s sales tax hike.

“Japan’s economy may continue to stagnate even after overseas economies recover, as the impact of the virus could be enormous,” one board member was quoted as saying.

“I’m doubtful of the view Japan’s economy will stage a strong rebound once the virus is contained,” another opinion in the summary showed.

One board member said the BOJ can continue to respond flexibly to risks, such as by holding another emergency policy meeting and ramping up government bond purchases, as recession fears heighten, the summary showed.

The summary, released roughly a week after the BOJ’s policy meeting, does not disclose the identity of the board member who made the comments.

Global travel restrictions, event cancellations and supply chain disruptions have heightened the chance Japan will slip into recession, keeping policymakers under pressure to deploy huge fiscal and monetary stimulus measures.

With the March monetary easing intended as a stop-gap move to address immediate strains in markets, the BOJ will focus more on how to address the economic fallout from the virus when it next meets for a rate review on April 27-28.

The government is working on a stimulus that will involve spending of at least US$137 billion. The BOJ also stands ready to expand stimulus again in April if the pandemic leads to cuts in jobs and capital expenditure big enough to derail prospects of an economic recovery, sources have told Reuters. — Reuters



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