Business & Economy

Japan central bank eases monetary policy to cushion Covid-19 impact

Tokyo, Apr 27 (efe-epa).- Japan’s central bank decided on Monday to ease its monetary policy by expanding its government and corporate bond purchase programs to soften the economic impact from the coronavirus pandemic.

The Bank of Japan (BoJ) said in a statement that it was necessary to “further enhance monetary easing” since the third-largest economy of the world has been in an “increasingly severe situation due to the impact of the spread of the novel coronavirus”.

Among the new measures adopted by the bank is the unlimited purchase of government bonds, until now restricted to a volume of 80 trillion yen per year ($745.18 billion), as well as an increase in the existing cap for the acquisition of corporate and commercial paper bonds.

The bank will now be able to purchase these financing instruments for the private sector at a maximum annual rate of 20 trillion yen, about five times more than the rate at which it has been acquiring them so far.

With these additional measures, the BoJ aims to address the decline of the country’s economy, which according to the bank’s new forecasts, will experience a contraction of between 5 and 3 percent in the current fiscal year, which began on Apr. 1 and will end on Mar. 31, 2021.

The forecast made by BoJ on Monday on the performance of the Japanese economy contrasts with the outlook it made in its previous meeting in January when it predicted an annual growth of the country’s gross domestic product in the current fiscal year of between 0.8 and 1.1 percent in real terms.

Japan’s central bank also revised its estimate of inflation downward and expects the Consumer Price Index, which doesn’t include fresh food prices, to be between -0.7 and -0.3 percent in the current financial year, far from the 2 percent annual inflation target fixed by the institution.

Apart from the expansion of its asset purchase programs, the BoJ has left unchanged the short-term benchmark interest rate of -0.1 percent, which it has applied since 2016 for deposits of financial institutions in the bank, to encourage spending and investment

Despite removing the limit on the purchase of government bonds, BoJ will target to keep the 10-year government bond yields at around zero percent, the institution explained in a statement.

“For the time being, the Bank will closely monitor the impact of COVID-19 and will not hesitate to take additional easing measures if necessary, and also it expects short- and long-term policy interest rates to remain at their present or lower levels,” BoJ added. EFE-EPA

ahg/pd/ssk

Tags

Related Articles

Back to top button
Close
Close