Bank of Japan has divined a creative new tactic to fight deflation as Covid-19 economic gloom takes deeper hold
The US Federal Reserve, European Central Bank, Bank of England, and Bank of Japan joined others in March with a wave of stimulus to stem damage from the coronavirus pandemic.
But in an online seminar on Friday Kuroda said the central bank saw no immediate need to cut interest rates, and instead will focus on easing corporate funding strains and stabilising markets with its lending facility and asset purchases.
In view of improvements in US dollar funding conditions and after consulting with the US Federal Reserve, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank have jointly decided to reduce the frequency of their seven-day operations from daily to three times a week, the BOJ said in a statement.
To clarify the scale of its money printing, the central bank said it plans to pump $1 trillion to cash-strapped firms through a range of crisis-response tools announced so far.
Such a view would reinforce market expectations that it will forgo bold monetary policy easing at this month's rate review, after the BOJ and the government unveiled a slew of support measures for businesses in the last few months.
In an emergency meeting on Friday, the Bank of Japan also extended the deadline for a raft of measures it has put in place to combat the fallout from the virus, including accelerated corporate debt purchases, by six months to March 2021.
The BOJ applies negative rates to only a small portion of deposits financial institutions park with the central bank, which leaves substantial room to cut rates further, Kuroda said.
Shimizu, a career central banker, will fill one of the BOJ's nine executive director posts that oversee the institutions' operations ranging from monetary policy, financial markets, economic analysis and the banking syste
The Bank of Japan decided at a meeting Monday to ease monetary policy, including expanding the purchase of commercial papers and corporate bonds, which work to deliver cash to companies.
The dilemma for the BOJ underlines the difficulties of managing Japan's approach to controlling the spread of the virus, which lacks punitive measures applied in lockdowns of many Western countries.
Japanese financial institutions have increased lending to middle-risk borrowers, or companies with higher credit risk, in search of higher yields amid years of ultra-low interest rates, the BOJ said in a semi-annual report on the financial system.
Abe has caved into pressure from within his own ruling bloc to boost the help with a payment of 100,000 yen for every citizen, instead of 300,000 yen for a limited number of households, analysts say, casting doubt about his leadership amid falling support.
While discussions are still in the initial stages, possible options on the table include further increases in purchases of corporate bonds and commercial paper (CP), and an expansion in the range of assets the central bank accepts as collateral in offering financial institutions loans, they said.
Japan is expected to slip into a deep recession this year with the economy set to contract for a third straight quarter in April-June, a Reuters poll showed
The Bank of Japan said on Wednesday it would scale back some operations in the wake of the government's decision to declare a state of emergency.
The Bank of Japan expanded monetary stimulus in an unscheduled policy meeting on March 16 to ease corporate funding strains and calm financial markets jolted by the health crisis.
"We need to come up with big, powerful economic and fiscal measures that meets the enormous magnitude of the hit from the coronavirus outbreak," Shinzo Abe told parliament on March 23.
While the government is tasked with containing the virus and protecting jobs, the BOJ has a role to play in preventing credit markets and dollar funding from drying up, Kuroda said.
The meeting, to be held from 12 p.m. (0300 GMT), will replace the scheduled rate review on March 18-19, the BOJ said in a statement released on Monday. BOJ Governor Haruhiko Kuroda is expected to hold a news conference after the meeting.
Almost 90%, or 33 of 38 economists surveyed March 3-5, expected the Bank of Japan's next move to be to expand monetary stimulus, a sharp turnaround from a February poll when only 30% expected easing.
Japan's economy had been expected to recover in the current quarter, but the epidemic has hurt exports and consumption through a decline in Chinese tourists, Haruhiko Kuroda told parliament.
Kuroda's comments, made in an emergency statement just days after a similar move by Federal Reserve Chair Jerome Powell, were welcomed by markets as a signal the world's biggest central banks were mustering a coordinated response to the crisis.
Kuroda called the coronavirus outbreak the "biggest uncertainty" for the domestic economy and flagged "additional easing steps without hesitation" if the economic risks from the virus heightened, Sankei said.
In a sign of concern over the cost of prolonged monetary easing, the former commercial banker said the BOJ must be ready to act not just to boost growth but to prevent its ultra-loose policy from disrupting the banking system.