Bank of Japan Governor Haruhiko Kuroda said interest rates would likely remain ultralow into 2023 and warned that the pandemic could end up having a longer-than-expected impact on the economy.The central bank chief said that firms were still under severe financing stress, adding that he was determined to support businesses with lending for as long as needed during the crisis.
Kuroda added that it would be difficult to move before the Federal Reserve, which hinted last week it would keep rates low through 2022 last week.The comments came after the BOJ earlier in the day increased its lending support for struggling companies while leaving its main monetary policy settings untouched as it continues to monitor the economic fallout from the coronavirus pandemic.
The ramped-up aid to companies, while largely a result of an expansion of related government measures, shows the central bank’s continued determination to support corporate financing and avoid a wave of bankruptcies wiping out jobs and production.
The bank now estimates the size of its overall package of virus measures at 110 trillion yen ($1 trillion), up from 75 trillion yen. Its two lending programs are worth 90 trillion yen, with corporate bond and commercial paper buying making up the rest.
Stocks, already buoyed by an overnight Federal Reserve move to buy individual corporate bonds, jumped after the midday break, helped by a Bloomberg report of U.S. plans to expand infrastructure spending. The Topix closed up 4.1%.
The BOJ hinted that its lending could increase further by adding the Greek symbol alpha after the 110 trillion yen figure.While it’s still not clear if the BOJ has done enough, Taguchi said the size of the “plus alpha” of possible extra help to come from the central bank would depend on how slowly economic activity recovers.
©2020 Bloomberg L.P
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