The Bank of Japan introduced more easing measures soon after Fed Cuts

The bank o fJapan introduced additional easing measures to fight against the losses incurred in COVID – 19 pandemic. The bank will also expand its asset purchase program and boost its ETF purchases.

Quick at a Glance

• Bank of Japan is all set to expand its asset purchasing and boosts its Exchange-traded funds (ETF) purchases.
• Banks would also take on a new operation to provide loans against corporate debts.
• The economy of Japan had sunk by the end of 2019 which would still remain weak due to the COVID – 19 effect.

Japan, the world’s third strongest economy, on Monday announced to ease monetary policy. The decision came out after the Federal Bank slashed rates to zero. Japan, joining hands with all the global banks, trying to combat the situation developed due to Coronavirus.

Japan rolls out its plans to buy risky assets like ETF’s double the value it had pledged to buy till now, the first time since 2016. The central banks will uplift the ETF’s purchase from 6 trillion Yen to 12 trillion yen. In the virtue of preventing the credit makers from freezing, the bank will buy corporate bonds worth 2 trillion yen would by the end of September.

The BOJ also decided to create a new loan program to provide zero-rate loans for a period of one year to the financial institutions. This would assist the financial institutions which as affected by the Coronavirus epidemic.

“The BOJ will take additional monetary easing steps as needed without hesitation with a close eye on the impact from the coronavirus epidemic for the time being,” it said in a statement after an emergency Policy Board meeting.

The BOJ Monetary Easing, the gist

• The bank doubled its budget for the purchase of ETF’s to support Tokyo stocks.
• The interest rates remained unchanged.
• Through the asset purchase program, the bank is committed to increasing Yen liquidity to help companies raise funds.

• The bank has also assured corporation with other major central banks to supply dollar funds at lower costs and for longer maturities.

• The BOJ guides short-term rates at minus 0.1 % and the 10-year government bond yield around zero which comes under the Yield curve control (YCC) policy.

The BOJ mentioning about the economy stated that the economy would remain weak for some time due to COVID-19, but will continue its expanding trend by 2020-21.

Prime Minister of Japan, Shinzo Abe appreciated the move as ‘Swift and appropriate’. He also said that a group of seven industrialized countries will hold an emergency meet to discuss their response to the spreading Coronavirus.

“Compared with other central banks such as the Fed, the BOJ’s steps lacked boldness. It clearly showed there’s little room left for the BOJ to ease further,” said Toru Suehiro, senior market economist at Mizuho Securities.

The governor of BOJ, Haruhiko Kuroda stated that the bank will not hesitate to take up appropriate measures within the time frame.

“There are so many uncertain factors. It is necessary that we continue to fully monitor the economic situations at home and abroad,” he said.“Coronavirus or not, if there is downward pressure on the economy and prices, we will consider additional monetary easing measures to deal with it.”

Japan’s economy had surged to 7.1% in the Oct-Dec quarter which was the sharpest one. This was due to a tax hike and devastating typhoon Hagibis last year. But in this quarter, the analyst has predicted the continuity in the downfall due to the coronavirus effect.

Final Thought

The central banks across the globe are working together effectively to reduce the effects caused by COVID-19. Mainly in terms of economy as every sector is witnessing a downfall as all industries are suffering by this epidemic. As various sectors like tourism, entertainment, etc have come to a halt. And the government imposing a ban on public gatherings, schools, etc have led to the major reasons for the downfall of the economy in many countries.