Bank of Japan pledges unlimited bond buying with troubled economy in sight Bank of Japan pledges unlimited bond buying with troubled economy in sight
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Bank of Japan pledges unlimited bond buying with troubled economy in sight

    NHK Senior Economic Commentator /
    NHK World Special Affairs Commentator
    On Monday, the Bank of Japan announced it will expand its coronavirus stimulus measures, including the scope of a government bond buyback program. The central bank scrapped a loose cap on the program, set at an annual rate of 80 trillion yen, and now has no limit on the amount it can buy.

    Policymakers held a one-day session on Monday, instead of a regular two-day meeting, to respond to the urgent situation surrounding the coronavirus pandemic. BOJ Governor Kuroda Haruhiko emphasized during a news conference that the Bank will do “whatever is necessary” to save companies and households from the crisis.

    The BOJ hopes its new measures will be particularly helpful for businesses. The central bank will buy corporate bonds and commercial paper worth up to 20 trillion yen, or around 185 billion dollars; this is almost three times the amount the bank had previously promised. It is also offering an 0.1% interest rate to financial institutions that lend money as part of a new loan program that aims to ease borrowing conditions on cash-strapped firms.

    Companies across Japan are in serious trouble. According to Teikoku Databank, a corporate credit research firm, 100 firms have filed for bankruptcy as of April 27th due to the pandemic. Hotels and restaurants have been particularly affected.

    Automakers, including the likes of Toyota and Nissan, are looking to borrow more as car sales plummet around the world. These companies will need to pay more in the long-term for loans, as credit agencies move to downgrade ratings.

    The BOJ is also trying to make it easier for financial institutions to lend to households. It has expanded the range of collateral eligible to be used as security in its lending program.

    The Bank of Japan warns that the country’s growth for fiscal 2020 will be at around minus 3 to minus 5% in real terms. That’s similar to the minus 3.7% rate seen following the 2008 global financial crisis.

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