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The Bank of Japan (BOJ) on Thursday downgraded its assessments of all of the country's regional economies for the first time in 11 years, as the coronavirus pandemic has severely impacted a broad range of businesses as well as public sentiment and expenditure.
In the central bank's quarterly "Sakura Report" released Thursday, the BOJ said that all of the country's nine regional economies "had been weak or facing strong downward pressure" from the spread of the coronavirus, with the bank lowering its view on all the regions for the first time since January 2009 in the wake of the global financial crisis.
The BOJ's latest report said that many manufacturers' sentiment had worsened and many Japanese companies had expressed their concerns over global demand slumping and weak domestic spending due to the global spread of the virus.
The central bank's most recent report comes on the heels of its Tankan survey released earlier this month revealing that Japan's large manufacturers' business confidence had turned negative in March for the first time in seven years, as sentiment was severely hurt by fears of the global economic impact from the pandemic.
The sentiment index plummeted to minus eight from zero in the recording period, marking its lowest level since the same reading was logged in March 2013, the BOJ said, adding that the index for large non-manufacturers stood at plus 8, diving from plus 20 in December's survey.
Looking ahead, the sentiment index for large manufactures is expected to fall to minus 11 in the months ahead, as concerns mount over global plants shuttering operations and supply chain disruptions linked to the pandemic.
The index is also likely to reflect concerns over falling global and domestic consumption and a decline in domestic economic activities following Japan declaring a state of emergency this week over the pneumonia-causing virus.
The BOJ's Tankan survey is regarded as a leading indicator of Japan's economic health and serves as a guide for the central bank regarding the future direction of its monetary policy.
The latest Tankan results could factor into the BOJ possibly shifting its policy henceforth and unrolling additional easing measures to underpin the world's third-largest economy amid the coronavirus crisis.
This point was underscored by BOJ Governor Haruhiko Kuroda in a teleconference earlier Thursday with the central bank's regional branch managers
Kuroda said the Japanese economy has been seriously impacted by the outbreak of the coronavirus and multiple key sectors had been hurt.
He also said that along with the global economic outlook remaining very unclear amid the pandemic, further easing measures could be unrolled by the BOJ if necessary.
"The BOJ will take additional easing measures without hesitation if necessary while closely monitoring developments in the spread of the virus," Kuroda said, adding that the pandemic has adversely affected the nation's key export sector and seen output, spending and tourism particularly hard hit.
"The uncertainty over the economic outlook is very high as it remains unclear when the global coronavirus infection will end," the BOJ chief also said.
Kuroda also said that corporate financing has been in trouble owing to the impact of the coronavirus and global financial markets have been volatile.
For the BOJ's part, in mid-march, additional monetary easing measures were rolled out in a bid to stabilize financial markets.
In an emergency meeting convened at the time, the BOJ decided to expand its asset purchasing program through the increased accumulation of of exchange-traded fund securities and corporate bonds.
The central bank also said its ETF purchases would be doubled from the current 6 trillion yen to an annual pace of 12 trillion yen (110.32 billion U.S. dollars).
The bank said it would also increase its target bond purchases and commercial paper by 2 trillion yen (18.38 billion U.S. dollars) by September.
Japan's central bank, in addition, announced a new policy enabling it to provide loans against corporate debt of about 8 trillion yen (73.54 billion U.S. dollars) as of the end of February as collateral at the interest rate of zero percent with maturity of up to one year.
The BOJ, however, opted not to plunge its short-term interest rates further into negative territory, past the current level of 0.1 percent, amid concerns such a move would diminish profits at commercial banks.
"The BOJ is committed to securing liquidity for corporate financing and stability in financial markets by introducing new kinds of market operations, and by increased purchases of commercial paper and corporate bonds," Kuroda said during the teleconference.
(ASIA PACIFIC DAILY)
