Article:
TOKYO (Reuters) - Bank of Japan Governor Haruhiko Kuroda said the central bank was ready to act "without hesitation" if market volatility blamed on the coronavirus outbreak undermines the economy, signalling his readiness to expand stimulus as early as next week.
The yen's spike to three-year lows and sharp falls in Tokyo stock prices on Monday added pressure on the BOJ to top up support for an economy hit by event cancellations, travel restrictions and cooling consumption related to the epidemic.
Comments and Ideas:
Yes the BOJ needs to step in now, and not later, to try and reduce the impact of the forces hitting the economy. These are not normal forces that the BOJ can take a step back on and watch for further developments. These are unprecedented forces that a normal market economy, on its own, is most likely not going to be able to overcome.
Article:
"Uncertainty over Japan's economic outlook is heightening. Investor sentiment is deteriorating somewhat, with market moves unstable," Kuroda told parliament on Monday.
"We'll take appropriate action without hesitation as needed with an eye on the impact of the spread of the coronavirus, particularly through domestic and overseas market moves."
The remarks suggest market developments and their impact on corporate sentiment will be key to what steps the BOJ will take at its policy-setting meeting on March 18-19.
"Monetary policy cannot contain the virus. But it can help prevent a sharp deterioration in business sentiment," a source familiar with the BOJ's thinking said.
"The BOJ has various tools at its disposal under its current framework," another source said, adding the central bank will likely scrutinise developments until the last minute in making the call on what steps to take.
Comments and Ideas:
Business sentiment and consumer sentiment might be both important components of the economy. Business sentiment needs a positive consumer sentiment and consumer sentiment needs a positive business sentiment.
The global stock markets are very volatile at the moment. So central banks around the world need to watch carefully and decide what they can do the stabilize markets and make sure there is not overall market panic that can turn into a downward spiraling effect on the rest of the economy or economies.
Lets hope the BOJ doesn't take too long to decide what do to. Most of the time, central banks are slow to respond and prefer a wait and see approach. The wait and see approach in this situation might be too late, and maybe as markets, industries, businesses, and consumers are already feeling the affect of the downturn in the economy related to the virus situation.
Article:
DWINDLING POLICY AMMUNITION
Japan's economy shrank more than initially estimated in the fourth quarter, and the impact of the coronavirus outbreak is increasing the risk of a recession.
Adding to woes for the export-reliant economy, the yen <.JPY> jumped more than 3% against the dollar. Tokyo's Nikkei average <.N225> hit 14-month lows as virus fears and collapsing oil prices fed a heavy sell-off.
Sources have told Reuters the BOJ may take steps to ensure firms hit by the outbreak do not face a financial squeeze before the March end of the fiscal year.
While the recent market volatility has heightened the chance the BOJ will take bolder monetary easing steps next week, there is uncertainty on what measures it could take.
Comments and Ideas:
Again, in an economy its never exactly linear, meaning there are always some industries and businesses that are doing better than others. However, looking at the overall downward trend, it might be correct to say there are more industries and businesses that are more challenged than those doing good.
The BOJ might need to find unprecedented ways to help the economy, in whatever it can do. Maybe there needs to be some innovations in how a central bank can step in a help companies in this crisis.
There should be no uncertainty. The government should give the BOJ any resources it needs to keep the economy going. Even if it means increase debt and increased stretching of financial tools. All that can be worked later, but for now, the economy needs unprecedented and unheard of historical help.
Article:
Under a policy dubbed yield curve control, the BOJ guides short-term interest rates at -0.1% and the 10-year government bond yield at around zero. It also buys risky assets such as exchange-traded funds (ETF) to funnel money to the economy.
Kuroda said that for now, the BOJ will act in line with guidance laid out in an emergency statement issued on March 2.
The statement said the BOJ will offer ample liquidity via market operations and asset purchases, suggesting it would make full use of existing tools before easing further.
Since then, the BOJ has been accelerating the pace of ETF buying. It bought 100.2 billion yen ($979 million) on Monday, matching a record pace of purchases made twice last week.
The BOJ could tweak its pledge to buy ETFs at an annual pace of roughly 6 trillion yen if it approaches the ceiling as a result of aggressive purchases, a third source said.
Deepening negative rates is another possible option, though many BOJ officials are wary of doing so as it could backfire by hurting commercial banks and discouraging them from lending.
The decision is likely to be a close call given the dwindling policy ammunition the BOJ has left and the rising cost of prolonged easing, the sources say.
Comments and Ideas:
Yes the BOJ needs to provide as much liquidity as it can. And more important this liquidity needs to get to whomever without a lot of government red tape.
The BOJ of course and the government will need to step in, like the US in 2008/2009 and help the banks as much as possible. What Japan does not need are banks that are too scared to do business and banks that are afraid to offer loan assistance to companies and families as needed to get through this situation.
The BOJ and the government need to make it priority to help banks stay in business and do what they are supposed to do.
Have a nice day and be safe out there!
© 2020, Tom Metts, all rights reserved
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