During an economic crisis, the necessary policy actions are clear and obvious.
As the last line of defense, governments and central banks do whatever it takes and inject capital in the markets. Governments will implement a bold fiscal policy, and central banks will significantly expand its funding.
That’s exactly what governments around the world have been doing, and the Japanese government is no exception. Under the Abe Cabinet, it issued additional government bonds to the order of ¥60 trillion — that is, more than 10% of GDP — along with the implementation of other policies. Despite having little room left to maneuver after years of unconventional monetary policies, the Bank of Japan has made it clear that it will work side by side with the government to prevent the economy from crashing.