BOJ expands easing steps to cushion virus' economic impact

27, Apr. 2020

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TOKYO, Kyodo - The Bank of Japan decided Monday to take additional easing steps for the second straight month, including abolishing its limit on buying government bonds and further expanding its asset-purchasing program, to cushion the economy from the impact of the spread of the novel coronavirus.

The BOJ said in a statement that it scrapped its annual ceiling of 80 trillion yen ($745 billion) on the amount by which it can increase its balance of holdings of government bonds, so as to provide ample liquidity to stabilize financial markets.

The central bank has pledged to buy bonds in a flexible manner to conduct an operation called yield curve control, which guides long-term interest rates to around zero percent.

The BOJ additionally raised the limit on corporate asset purchases to help companies secure funds amid the continuing spread of the pneumonia-causing virus.

The central bank lifted its target for corporate bond and commercial paper purchases to about 20 trillion yen in total until the end of September, up from a total of 7.4 trillion yen introduced in March.

The central bank decided last month to introduce further easing measures for the first time in over three and a half years.

BOJ Governor Haruhiko Kuroda will meet the press later in the day to explain the central bank's decision.

The BOJ also decided to boost loans to financial institutions by expanding the range of eligible collateral to 23 trillion yen as of the end of March, up from 8 trillion yen decided in the last month's meeting.

However, it maintained its short-term interest rates unchanged at minus 0.1 percent and its annual target for exchange-traded fund purchases at up to 12 trillion yen.

In its quarterly economic and inflation outlook report released following Monday's policy meeting, the BOJ downgraded its growth forecast in fiscal 2020 through March 2021 to between minus 3 percent and minus 5 percent from the 0.9 percent growth initially projected in January.

The International Monetary Fund said earlier this month that the Japanese economy is projected to shrink 5.2 percent in 2020 from a year earlier, the worst contraction since 2009, while the global economy is expected to contract by 3.0 percent.

The BOJ released its inflation outlook for the three years through fiscal 2022 and said that prices are not expected to reach beyond its 2 percent inflation target.

In fiscal 2020, the consumer price index will fall into negative territory at between minus 0.3 percent and minus 0.7 percent, it said.

The BOJ said Thursday it would shorten the initially planned two-day meeting from Monday to a one-day event as part of efforts to prevent virus infections among its board members. (Kyodo)