(Reuters) - The Bank of Japan eased monetary policy on Monday by pledging to buy risky assets such as exchange-traded funds (ETF) at double the current pace, joining global central banks in combating the widening economic fallout from the coronavirus epidemic.
Following are comments from BOJ Governor Haruhiko Kuroda at his post-meeting news conference:
“The coronavirus has already had an impact on Japan’s economy through a decline in inbound tourism, as well as on exports, output and consumption ... Event cancellations and people staying home have led to a sharp slump in consumption. That’s why we revised down our economic assessment.
“Given the fact the epidemic is spreading with a lag among various countries, the impact of the virus could continue for the time being. But governments are taking steps to contain the virus, so once the impact is mitigated demand could pick up. Japan’s economy is likely to then resume a moderate expansionary trend.
“The BOJ decided it was necessary to take necessary action quickly, particularly ahead of the March fiscal year-end, to ensure corporate financing remains smooth and markets restore stability.”
“I don’t think we have reached a limit on how deep we can cut interest rates. If necessary, we can deepen negative rates further. But what’s necessary now is to ensure small and midsize firms have ample funding, and to restore market stability ... Market risk appetite has been weakening, so it was necessary to affect risk premia.
“We can continue to pump ample liquidity into the market. We pledge to buy government bonds at roughly 80 trillion yen per year. We can increase bond buying as much as we want under this guidance.”
“As for the global economy, it’s hard to foresee a V-shaped recovery. We might see global growth stagnate for some time. But I don’t think we will see the kind of huge slump experienced after the Lehman crisis.”
“It’s true deeper negative rates could hurt financial institutions’ margin. But it would help boost their profits if the economy expands as a result. So, we can’t necessarily say that (deepening negative rates) would work unfavourably for the economy.”
“The biggest issue now is the slump in consumption. But looking ahead, the big drop in crude oil prices could weigh on prices. I don’t think price growth will turn negative ... But if oil prices continue to fall at the current pace, it could affect inflation and inflation expectations, so we need to pay close attention.”
“We’ve pledged to buy at a pace of 12 trillion yen per year for the time being. I don’t have any image on how long that will be. If necessary, we will keep buying at the pace ... We need to look comprehensively at how our policy affects our balance sheet, not look just at certain aspects of our policy in discussing the side effects.
“If the economy and prices come under further pressure, we will of course consider additional monetary easing steps.”
“Investors are averting risks and some are even moving to cash. Given a lot of global transactions are made in dollars, that means companies across the globe want to procure dollars quickly. That could lead to a shortage of dollar funding.”
“It’s important that currency rates move stably reflecting economic fundamentals. If currency moves are volatile, the uncertainty makes job difficult for companies ... We’re not in charge of the currency policy. But if yen rises affect the economy, prices and financial conditions in Japan significantly, we may need to ponder a response.
“Each central bank conducts policy to achieve sustainable economic growth and its price target. Doing this will create future policy scope in the long run. But I think it’s inappropriate to prematurely end monetary easing or interest rates (just to create scope to ease policy in the future).”
Reporting by Leika Kihara, Daniel Leussink, Tetsushi Kajimoto; Editing by Subhranshu Sahu