What Additional Measures Could the BOJ Unveil to Support Japan’s Economy?

Amid rising worries about an economic recession in the wake of the coronavirus pandemic, the Bank of Japan is expected to roll out more financial support for affected companies in a bid to boost domestic consumption and prop up the economy. With interest rates already in negative, unlike several other central banks, the BOJ has limited tools in its arsenal to provide stimulus.

According to a recent Reuters report, the BOJ could unveil measures to ease corporate funding strains through purchase of corporate bonds and commercial paper (CP). The central bank could roll out these initiatives as soon as next week during its rate review meeting.

A source confirmed to Reuters the challenge the central bank faces in boosting the economy even as the government struggles to contain the spread of the virus, “There’s no doubt the economy is in a pretty bad shape. But taking steps to boost demand now would stimulate consumption and risk spreading the virus.”

More radical measures, including steps to prevent bankruptcies and protect jobs in the economy could be unveiled towards the second half of the year, depending on how the pandemic progresses. So far, the BOJ has committed to spend around $18.56 billion towards increasing corporate bonds and CP purchases.