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BoJ’s Kuroda vows more stimulus if pandemic derails recovery

TOKYO: Bank of Japan governor Haruhiko Kuroda yesterday reaffirmed the bank’s readiness to expand monetary stimulus if the coronavirus pandemic threatened to derail a fragile economic recovery.

Kuroda said the world’s third-largest economy was picking up, sticking to the BoJ’s optimistic view even as an expanded state of emergency declared on Wednesday heightened fears of another recession.

“Japan’s economy is likely to improve as a trend as the impact from the pandemic gradually subsides, although the pace will be moderate as caution over Covid-19 persists, ” Kuroda told a quarterly meeting of the BoJ’s regional branch managers.

“The BoJ will scrutinise the impact of the pandemic for the time being and stand ready to take additional easing steps without hesitation if needed, ” he said.

The remarks came ahead of the BoJ’s two-day policy meeting next week, when it will issue fresh quarterly growth forecasts.

Sources have told Reuters the BoJ is likely to slightly revise up its economic forecast for next fiscal year on hope the government’s stimulus package will moderate the pain from state of emergency measures to combat Covid-19.

BoJ HQ in TokyoBoJ HQ in Tokyo

Having already extended a raft of measures last month to ease funding strains for firms hit by the pandemic, the BoJ is expected to hold off ramping up stimulus at the Jan 20-21 policy meeting, the sources said.

After suffering its worst postwar contraction in April-June last year due to lockdown measures to combat Covid-19, Japan’s economy has been recovering thanks to solid exports and robust domestic demand for durable goods.

But consumption is likely to take a hit from the government’s decision to expand a limited state of emergency in the Tokyo area to seven more prefectures, as infections remain around record levels.

Japan’s wholesale prices fell 2.0% in December from a year earlier on sliding fuel costs, data showed yesterday, a sign that the hit to demand from the coronavirus pandemic is weighing on the world’s third-largest economy.

The pace of decline was smaller than the previous month’s 2.3% fall, however, as a rebound in global demand and hopes over the rollout of vaccines pushed up the prices of some commodities.

The fall in the corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, was smaller than a median market forecast for a 2.2% decline, data by BoJ showed.

The data highlights the chance wholesale prices will narrow their margin of declines in coming months, if expectations of a global recovery continues to push up crude oil and other commodities prices.

Prices of some chemical and electronic goods ticked up in December on firm demand for automobile parts, a sign strong demand for manufactured goods worldwide was underpinning inflation, the data showed.

Japanese carmakers including Toyota Motor Corp and Honda were forced to halt output at their overseas factories due to a shortage of semiconductors, as the pandemic disrupted supply chains.

But the hit to the economy from the coronavirus pandemic will keep any recovery in overall prices modest, analysts say.

“Given a recent resurgence of infections, the coronavirus pandemic will continue to weigh on wholesale prices, ” a BoJ official told a briefing. — Reuters

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