Tokyo, Sept. 12 (BUS): The Bank of Japan is expected to finalize its pandemic relief financing plan as scheduled this month and discuss adjustments to policy guidance that the COVID-19 pandemic is the biggest economic risk, according to three familiar sources. With his reflection he says.
The sources said the final decision will be made at the Bank of Japan’s policy meeting on September 21-22, when the board of directors will examine the data to ensure that the persistently high coronavirus cases in Japan do not lead to a sharp decline in economic activity.
Japan’s economy expanded 2.2% annually in April and June, posting a slower-than-expected recovery from the COVID-induced recession as resurgent infections, supply restrictions and rising raw material costs weigh on consumption and production, Reuters reports.
Ending the plan will reflect easing funding pressures among small service sector firms hit hard by the pandemic, as lifting COVID-related restrictions including easing border controls helps revive consumption. Read more
“While some companies remain under pressure, corporate finance has generally improved,” said one of the sources. Another source said, “The terms of the scheme’s termination are in place.”
At the policy meeting, the Bank of Japan is widely expected to maintain its interest rate targets at -0.1% for short-term rates and around 0% for the 10-year government bond yield.
The country’s fragile recovery has forced the Bank of Japan to stay out of the global wave of central banks tightening monetary policy to combat rising inflation.
The Bank of Japan has already backed off most contingency plans to cushion the immediate blow from the COVID-19 crisis, but kept the scheme targeting small businesses until September.
Analysts say ending the plan would symbolize how the Bank of Japan will shift away from crisis-mode policies, and turn its attention to broader risks such as rising input costs and the prospect of slowing global growth.
As risks to the economy widen, the sources said, the BOJ may also change part of its policy guidance pledging to “scrutinize the impact of the pandemic” and “strive to support corporate financing terms”.
But the sources said the BoJ is likely to leave more important parts of the guidance that promise to ramp up stimulus as needed, and keep interest rates at “current or low” levels unchanged.
“The Bank of Japan may see scope to discuss minor adjustments to the guidance,” a third source said. “But the main message likely won’t change, which is the need to keep policy very loose.”