In a move that was widely expected, the central bank also decided to remove the ceiling on its purchases of government bonds. It already has been purchasing trillions of yen (tens of billions of dollars’) worth of government bonds to counter deflation.
Its latest steps are similar to what central banks around the world are doing to curtail the massive damage the outbreak is unleashing on company profits and business activity. The benchmark Nikkei 225 stock index jumped 2.4% by midday Monday.
“Japan’s economy has been in an increasingly severe situation due to the impact of the spread of the coronavirus at home and abroad,” the Bank of Japan said in a statement. Additional monetary easing may be needed, and the central bank was closely monitoring the situation, it said.
The bank issued a separate statement reiterating that the economy was in a serious state but was expected to improve once the impact from the pandemic declines. It also warned much remains unclear. Japan has reported about 13,000 coronavirus cases so far, and fewer than 400 deaths. As is true elsewhere, the number of confirmed cases is thought to understate the actual number of those who may have been infected.
Restaurants, concerts and other events have closed, and tourism is practically at a standstill. Auto factories have suspended production and people are being asked to work from home and stay home. Japan’s economy, the world’s third largest, is dependent on exports, centered around products like cars and electronics goods.
But it’s also driven by small and medium size businesses, which analysts say are at major risk from the social distancing restrictions aimed at curbing the spread of the coronavirus. The economy contracted at a 7.1% annual rate during the October-December period and is thought to be already in a recession, though data for the full first quarter of this year have not yet been released.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama