Bank of Japan’s Kuroda Signals Readiness to Ease More to G-7 Peers
Bank of Japan’s Kuroda Signals Readiness to Ease More to G-7 Peers
(Bloomberg) -- Bank of Japan Governor Haruhiko Kuroda emphasized his intention to ease policy further if necessary to his Group of Seven counterparts on Tuesday as the coronavirus pushes the global economy sharply into reverse.
The pandemic is making the outlook for the global economy extremely uncertain, Kuroda told reporters in Tokyo after explaining the BOJ’s policy response during a video meeting of G-7 finance ministers and central bankers.
Kuroda and Finance Minister Taro Aso both spoke of the grave economic damage caused by the virus shortly after the International Monetary Fund forecast the biggest global recession in almost a century this year.
“It’s a fact that the spread of the virus around the world is forcing downward pressure on the global economy,” Kuroda said. “I indicated my intention to take additional easing measures without hesitation, if needed, as I closely monitor the effect of the virus.”
The dire outlook is raising questions over whether the BOJ has enough ammunition left to make a difference. The economic shock is causing analysts to talk about the risk of Japan slipping back into deflation.
The BOJ is scheduled to update its quarterly economic outlook at its April 27-28 policy meeting. Kuroda often refers to the IMF’s projections when he gives his global economic outlook. The governor last week hinted that a major downgrade of the bank’s forecasts was likely by saying the virus was having a serious impact on the economy.
The IMF sees Japan’s economy shrinking 5.2% this year, the most since 2009.
Even before the pandemic, Japan’s economy suffered an annualized contraction of 7.1% in the final three months of last year due to a sales tax hike and typhoon damage. Economists see the economy shrinking for three straight quarters through the middle of the year with Goldman Sachs forecasting a 25% pace of decline in gross domestic product from April to June.
Prime Minister Shinzo Abe put together Japan’s biggest ever economic package of around $1 trillion last week to help households and companies make ends meet amid suspended factory production lines, closed shops and facilities, and instructions to consumers to stay at home.
Abe also declared a state of emergency in parts of the country accounting for almost half the economy that is putting further pressure on firms and families. Yet his economic package still hasn’t passed through parliament and it’s not known when cash handouts will reach those in need.
With fewer than 10,000 virus cases in Japan policy makers have taken a softer approach on shutting down activity in the economy, compared with U.S. and Europe.
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