The Bank of Japan’s pandemic-relief program had a September deadline. The Japanese central bank however, has signaled its readiness to extend the program beyond the current deadline if necessary. Governor Haruhiko Kuroda said, the country struggles with a spike in COVID-19 infections that is crippling their economy.
He said that the world’s third-largest economy remains on a path toward recovery. Moreover, robust exports and corporate profits offset some of the pandemic’s damage to consumption.
Kuroda warned though, that there was high uncertainty about the pace of vaccine rollouts. This could inflict longer-than-expected pain on their economy.
For the time being, he said, risks to Japan’s economic outlook are skewed to the downside. This was noted from his speech delivered at a seminar on Wednesday.
He further said that taking into account the impact of the pandemic, they will consider extending further the deadline for the BOJ’s measures. That is to ease corporate funding strains caused by the crisis.
A year ago, the central bank ramped up asset purchases and put a loan program in place. Its purpose was to channel money to cash-strapped small firms. That was to cushion the blow from the health crisis.
Big manufacturers that benefit from solid overseas demand have paid back some of the loans. However, small retailers remain under stress as pandemic restrictions on activity hurt consumption.
Decision to Extend the Programme in June or July
In containing the coronavirus pandemic, Japan is lagging other major economies.
But many analysts expect the BOJ to decide on extending the program at its meeting either in June or in July.
Due to a slow vaccine rollout and new COVID-19 infections hitting consumption, the country’s economy declined more than expected during its first quarter. While capital expenditure dropped unexpectedly, export growth also slowed sharply.
The BOJ governor said that economic activity will remain below post-pandemic levels for the time being. He was pointing to a widening divergence among sectors.
He also said that the near-term focus would be to respond to the pandemic’s impact. This indicates that Japan would fall well behind other central banks in withdrawing crisis-response stimulus measures.
Meanwhile, on Wednesday, global stocks dropped and cryptocurrencies declined. Investors are staying away from assets that they consider vulnerable to any removal of monetary stimulus.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.3%, while Japan’s Nikkei shed 1.5%.
