The Bank of Japan is considering downgrading its assessment of the country’s economy at its upcoming policy meeting next week in view of the deepening economic impact of the globally spreading new coronavirus, according to sources close to the matter.
The BOJ is expected to revise its view that the economy is on a moderate expanding trend — an expression it has been using since March 2017 — in a statement to be issued after the two-day policy-setting meeting set to start Wednesday, after assessing recent developments such as the sharp fall in the number of inbound tourists and reduced exports to China, the sources said.
The central bank is now expected to say the recovery has slowed, the sources said. In a statement released after its January policy meeting the bank said that the country’s economy “is likely to continue on an expanding trend” through fiscal 2021, supported by government stimulus.
However, the spread of COVID-19 has taken a heavy toll on consumer spending recently, and many businesses already hit by a consumption tax increase on Oct. 1, from 8 percent to 10 percent, have suffered a steep fall in sales for the fourth straight month through February. Japan’s recent ban on entry of South Korean and Chinese travelers is likely to deal an even more severe blow to tourism and industries such as retail industries through March.
A government survey showed Thursday that business sentiment among large firms in the January to March period fell to its lowest level in five years and nine months due largely to impacts of the new coronavirus that causes COVID-19.
Earlier Thursday, BOJ Gov. Haruhiko Kuroda met with Prime Minister Shinzo Abe to discuss responses to the global market turmoil.
Though details of discussions between Kuroda and Abe, held at the prime minister’s office, are not known, Kuroda told reporters after the meeting, “We will not hesitate to take appropriate measures in a timely manner whenever needed,” possibly including further monetary easing.
Their meeting followed further falls on stock markets in Japan and the rest of Asia after the World Health Organization labeled the outbreak of the virus a global pandemic, and the United States banned the entry of travelers from Europe, except the U.K., for 30 days from Friday.
Kuroda said the central bank would take necessary actions as promised in its rare emergency statement issued last week, which pledged to provide ample liquidity to ensure financial market stability.
At a regularly scheduled two-day policy meeting from Wednesday, the BOJ is expected to discuss the possibility of further monetary easing steps including a plan to buy more exchange-traded funds by lifting the annual target of ¥6 trillion ($57 billion).