The Bank of Japan (BOJ) will hold an emergency policy meeting today to discuss support measures for financial institutions that
The Bank of Japan (BOJ) will hold an emergency policy meeting today to discuss support measures for financial institutions that boost lending to small firms hit by the COVID-19 pandemic.
The move comes amid a sharp economic downturn—Japan’s economy slipped into a recession last quarter for the first time in nearly half a decade. The planned subsidy is a departure from years of negative interest rate policy that has been criticised by some for eroding profits and discouraging lending from financial institutions. The IMF has warned against further reductions of negative interest rates, citing the need for amplified fiscal spending to improve management of the pandemic’s economic fallout.
Considering that further cuts to interest rates would run counter to the BOJ’s current efforts to boost lending from commercial banks, it is unlikely that any changes to current rates will be announced. As the government lifts its COVID-19 state of emergency in several parts of Japan and the need for support to small businesses intensifies, the BOJ is more likely to focus on credit easing measures and cooperate with the government in its efforts to expand support for corporate financing.
Wake up smarter with an assessment of the stories that will make headlines in the next 24 hours. Download The Daily Brief.