BOJ prepared for additional measures as state of emergency lifts

Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Tuesday that the central bank is ready to roll out additional measures to soften the economic impact of the COVID-19 pandemic.

The announcement still maintained a bleak outlook even after the state of emergency was lifted in Tokyo. The BOJ had recently pledged its own version of the Fed’s “Main Street” lending programme in order to fund small businesses hit by the virus.

Prime Minister Shinzo Abe lifted a state of emergency as the number of COVID-19 cases fell across Japan, easing on social distancing and quarantine measures. However, analysts believe that the third-largest economy in the world is more likely to suffer from inflation as it remains distant from the BOJ’s 2% target.

Under a policy dubbed yield curve control, the BOJ guides short-term interest rate at -0.1% and the 10-year bond yield around 0%. It also buys large amounts of government bonds and risky assets to pump money into the economy.

Abe said that his government on Wednesday would compile its second budget. This along with its initial stimulus package from April, would amount up to ¥200 trillion ($1.85 trillion).

Japan fell into a recession for the first time in 4 years in the last quarter, leading the country to its steepest post-war decline.