Bank of Japan decides on more easing measures amid pandemic fallout

The Bank of Japan decided on Monday to take additional monetary easing measures to help alleviate the economic fallout from the coronavirus pandemic.

The bank will “significantly” increase the upper limit on purchases of commercial paper and corporate bonds to about 20 trillion yen (186 billion dollars), boost its corporate loan offering in response to the pandemic and buy an unlimited quantity of government bonds, it said in a statement following a one-day policy meeting.

“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 central bank said.

Prime Minister Shinzo Abe’s government on Monday submitted to parliament a supplementary budget worth more than 25 trillion yen to respond to the coronavirus crisis.

Abe decided in mid-April to expand a state of emergency to the whole country from seven prefectures as the number of coronavirus infections continued to rise across the country.

Even before the pandemic, the Japanese economy had already taken a hit from a consumption tax increase.

The country’s economy shrank at an annualized rate of 7.1 per cent in the last quarter of 2019, as Abe’s government raised the tax from 8 to 10 per cent on October 1 amid sluggish consumer spending and stagnant wages.

The bank also said on Monday that future economic developments are “extremely unclear as they could change depending on the timing of the spread of Covid-19 subsiding and on the magnitude of the impact on domestic and overseas economies.”

The bank has revised down its economic growth outlook, and now expects the economy to contract by between 3 and 5 per cent for the current financial year.

It has also predicted the economy will fall back into deflation, and projected that consumer prices would fall by between 0.4 and 0.8 per cent for the year ending March 2021, compared with an increase of between 0.9 and 1 per cent estimated in January.

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The bank expected the inflation rate to be between 0 per cent and an increase of 0.7 per cent in the fiscal year 2021, ending March 22.

This remains far off the bank’s 2-per-cent inflation goal set in April 2013, when it launched a monetary easing campaign to prop up the world’s third-largest economy and overcome deflation. (dpa)