The Bank of Japan (BoJ) has decided this Friday extend financial aid programs to companies until March 2022 in response to the pandemic, as well as the maintenance of its extensive battery of flexible measures that the agency has approved throughout the crisis.
In its monthly meeting on monetary policy the BoJ has decided extend the Special Financial Support Program in Response to Covid-19 for a further six months, activated as an aid to companies and which in principle ended in September of this year.
The bank has approved this measure with a majority of 8 votes and one abstention, as the institution understands that the financial stress situation caused by the health crisis will continue to last this year, although there are signs of improvement.
The financial institution also decided maintain its policy of monetary flexibility, because this second quarter is expected to be another one of contraction for the Japanese economy, according to analysts. The BoJ keeps short-term interest rates at negative 0.1% through control of the yield curve and guides the 10-year government bond yield around zero interest.
It will extend loans to companies hit by the crisis
The BoJ has granted funds to banks to extend loans to companies affected by the economic crisis. The extensive purchase of corporate bonds and promissory notes It has been another of the measures to combat the economic effect of the health crisis. The Bank will purchase these private debt assets until the end of March 2022 with a maximum amount of 20 trillion yen (152,261 million euros).
These measures are expected to alleviate the lack of liquidity that affects the non-manufacturing sector -especially businesses such as bars and restaurants- due to the prolonged states of health emergency in the main Japanese cities, mainly in Tokyo and Osaka.
The Central Bank of Japan also establishes in 12 trillion yen (90,437 million euros) per year the maximum amount for the purchase of assets as exchange-traded funds. Regarding inflation, the persistent stability of prices in Japan contrasts with concerns about a rise in prices in the United States, where these perspectives have led to a plan to advance the withdrawal of stimuli.
The Federal Reserve (Fed) of the world’s leading economy indicated on Wednesday that it will start raising interest rates in 2023, sooner than expected. Monetary policy will remain intact. In Japan, the consumer price index, a key indicator of inflation, rose 0.1% in May compared to the previous year, according to data released today by the Executive.
This is the first rise in the CPI for the first time in 14 months according to data from the Ministry of the Interior and Communications, although it is still very far from the BoJ target of 2% per year. In the United States, by contrast, the index soared 5% in May, the fastest rise in 12 years.
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