The Bank of Japan is set to boost funding support for companies, but it will avoid cutting interest rates, sources say, as it could encourage people to step out of their homes to splurge and undermine government efforts to curb the coronavirus outbreak.
FILE PHOTO: A man runs past the Bank of Japan building in Tokyo, Japan, July 29, 2016. REUTERS/Kim Kyung-Hoon/File Photo
More radical monetary easing steps to spur demand - such as interest rate cuts - are off the table as they could hamper government efforts to keep households home and businesses shut, said sources familiar with the BOJ’s thinking. “Debate on how to reflate the economy only kicks off when there’s more clarity on when the virus will be contained,” a third source said, adding that any steps the BOJ decides next week will be an extension of measures taken last month.
“The BOJ may double or triple the amount it pledges to buy,” said Tomoyuki Shimoda, a former BOJ official who is now an economics professor at Hitotsubashi University. Japan’s government last week expanded a state of emergency to include all of the nation. But it has struggled to contain the pandemic, as a lack of enforcement measures still keep many businesses open and trains running with commuters.
That pledge is now out the window as the pandemic forces the BOJ to focus on immediate damage control, rather than achieving what has already become an obsolete target.
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