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90% of Analysts See BOJ Adding Stimulus Over Virus Hit: Survey

90% of Analysts See BOJ Adding Stimulus Over Virus Hit: Survey

(Bloomberg) -- The Bank of Japan is likely to add stimulus next week to combat a recent plunge in stocks, a surge in the yen and an escalating coronavirus pandemic that threatens to trigger a deep recession.

That’s the view of 90% of 41 economists surveyed by Bloomberg ahead of the bank’s next meeting on March 18-19. Most of the analysts said they see the BOJ stepping up asset purchases to stabilize markets, as Governor Haruhiko Kuroda pledged earlier this month to do.

Click here for the survey’s full results.

90% of Analysts See BOJ Adding Stimulus Over Virus Hit: Survey

Kuroda underscored his readiness to act on Thursday, saying the bank was monitoring the situation closely and wouldn’t hesitate to take appropriate measures in a timely manner.

BOJ Is Said Likely to Strengthen Stimulus Next Week on Virus

Those measures likely include more buying of exchange-traded funds, according to 63% of analysts who see the BOJ next week raising its annual target for net purchases of ETFs from the current level of 6 trillion yen ($58 billion). The bank could also boost ETF buys without explicitly raising its target, some economists said.

Introducing a new lending program to help companies hurt by the pandemic is another step the BOJ is seen taking, according to all of the analysts surveyed.

The BOJ will make its policy announcement just hours after a meeting of the Federal Reserve at which the U.S. central bank is expected to take further action to counter the economic threat from the virus.

Any move from the Fed is likely to ramp up pressure on Kuroda and his colleagues, but after seven years of massive stimulus the BOJ is seen to have exhausted much of its policy ammunition. The BOJ has already cut its key interest rate below zero and now holds assets worth more than Japan’s entire gross domestic product.

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Still, economists said the BOJ could be cornered into cutting rates if the yen were to strengthen to the 99-yen-against-the-dollar mark, a level that would severely squeeze exporter profits.

The risk of currency appreciation has risen because of rate cuts by other major central banks, 90% of the analysts in the survey said. The yen traded Thursday at about 104 per dollar after spiking earlier this week amid crashing oil prices and the virus concerns.

The BOJ will have to weigh all of that in its thinking, along with an economy that analysts said will shrink an annualized 2.6% this quarter, following the sharpest contraction since 2014 in the three months before that.

To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net;Cynthia Li in Hong Kong at cli205@bloomberg.net

To contact the editors responsible for this story: Paul Jackson at pjackson53@bloomberg.net, Jason Clenfield

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