BoJ: Center of Unusual Methods
In Japan, which is among the countries most affected by the coronavirus outbreak, the country’s central bank gave the message that they were following closely and would take steps if necessary, although the country’s central bank did not take a clear step against the devastating effects of the epidemic at its meeting on 21 January.
Stating that the impact of the novel coronavirus on China and the world economy was a cause of concern, BoJ President Haruhiko Kuroda also said, “The Chinese economy has a large share in the global economy. Therefore, the effects of the virus can be great. We can go to monetary easing without hesitation, if necessary, but it is too early for this” (Bank of Japan 2020a-j).In a later statement, Kuroda also stated that if the coronavirus pandemic threatened Japan’s economy and price trends significantly, the central bank would not hesitate to evaluate additional mitigation steps.
The BoJ announced a series of measures to increase monetary easing by meeting extraordinarily on 16 March, just before the 18-19 March monetary policy meeting. In this context, BoJ announced that it would carry out various operations including Japanese government bond purchases and dollar-based fundraising transactions. The bank also took measures, including the launch of a new operation to facilitate corporate finance. Within the scope of the measures to facilitate the financing of the companies, the bank started a new operation to provide loans as collateral against corporate debts until the end of September, with a maturity of up to 1 year with zero interest rate. Increasing the upper limit in corporate bonds and bills purchases to 2 trillion yen in total, the bank also increased the amount of purchases of exchange traded funds (ETF) from 6 trillion yen annually to 12 trillion yen, and Japan real estate investment funds (J-REIT) purchases from 90 billion yen annually to 180 billion yen (Bank of Japan 2020a-j).
At its meeting which ended on 27 April, the bank further loosened its monetary policy and announced that it would purchase unlimited amount of government bonds. Removing the upper limit for purchases of government bonds, which was previously 80 trillion yen per year, the bank announced that it would buy corporate bonds and bills totalling approximately 20 trillion yen. BoJ also stressed that private fundraising processes could be strengthened to facilitate financing against COVID-19. According to the text of the decision, the maximum maturity of corporate bonds to be purchased by BoJ would be increased to 5 years. On the other hand, 12-trillion-yen annual exchange traded funds (ETF) and 180-billion-yen annual Japan real estate investment funds (J-REIT) would be purchased (Bank of Japan 2020a-j).
By May, while the bank did not change interest rates and monetary policy, it introduced an interest-free and unsecured loan fund of about 30 trillion yen to support the financing of small and medium-sized enterprises. It was stated in the text of the decision published in this context, “We have announced about 20 trillion yen of corporate bonds and bills purchases, and secondly, fund guarantee programs against private sector debts of about 25 trillion yen, within the scope of the financing package that we have commissioned against the negative effects of the coronavirus, with a total size of 75 trillion yen. Today, as a third measure, we have taken a new financing measure, which will provide approximately 30 trillion yen of interest-free and unsecured loan funds to support the financing of SMEs. On the other hand, we decided to continue with the previously announced package until March 2021 by extending the duration of the measures by 6 months” (Bank of Japan 2020a-j).
On 16 June, BoJ made a commitment that it would not hesitate to take additional expansion measures in the face of the effects of the novel coronavirus (COVID-19) pandemic, while not making changes in interest rates and monetary policy. The bank announced that it would continue to buy 2-trillion-yen corporate bonds and 3-trillion- yen corporate bills, and would make additional purchases of 7.5 trillion yen each by the end of March 2021 (Bank of Japan 2020a-j).
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