TheÂ Japanese yen is strengthening against its G10 currency counterparts midweek, driven byÂ theÂ central bankâs signal that it would impose additional monetary stimulus toÂ save theÂ worldâs third-largest economy. Investors were also bullish onÂ new data showing banks are increasing their lending programs. With Tokyo planning toÂ top up its $1 trillion stimulus efforts, could Japan avoid aÂ financial crisis inÂ theÂ aftermath ofÂ theÂ coronavirus?
Bank ofÂ Japan (BoJ) Governor Haruhiko Kuroda said onÂ Tuesday that theÂ central bank would do âwhatever it canâ toÂ prevent additional fallout from theÂ coronavirus pandemic. InÂ his semi-annual testimony toÂ Parliament, Kuroda noted that theÂ BoJ would use all available tools toÂ stimulate theÂ economy. He alluded toÂ money-printing, cutting interest rates, andÂ increasing market operation tools asÂ just some ofÂ theÂ measures theÂ central bank could employ.
Kuroda did dismiss purchasing municipal bonds, something that many central banks have started doing.
What’s most important forÂ us is toÂ take steps toÂ smoothen corporate financing andÂ stabilize markets. We will do whatever we can asÂ aÂ central bank, working closely with theÂ government.
Prime Minister Shinzo Abe andÂ his Cabinet confirmed that they are ready toÂ help theÂ countryâs massive automobile industry that has been impacted byÂ global supply chain disruptions andÂ slumping demand. Chief Cabinet Secretary Yoshihide told reporters that it would use any available tool toÂ support theÂ nationâs vehicle andÂ parts makers, including direct financial assistance andÂ bailouts.
TheÂ industry is suffering deeply from sluggish US andÂ European sales, andÂ suspension inÂ domestic output. We’ll deploy all policy means toÂ assist inÂ their accessing funding.
Abe has also promised toÂ unleash additional fiscal support onÂ top ofÂ his record $1.1 trillion relief andÂ stimulus package. But this is unlikely toÂ include tax cuts due toÂ Japanâs ballooning public debt levels, says Finance Minister Taro Aso. TheÂ prime minister is considering aid toÂ businesses struggling toÂ pay rent, corporate subsidies, andÂ support forÂ students who have lost part-time jobs.
Meanwhile, according to the BoJ, bank lending surged 3% last month over the same time a year ago. For the last 12 months, the value of loans has risen by about 2%. Foreign exchange reserves jumped $2.4 billion to a little more than $1.368 trillion in April.
TheÂ Coincident Index came inÂ atÂ 90.5 inÂ March, while theÂ Eco Watchers Survey clocked inÂ atÂ 7.9 inÂ April.
TheÂ USD/JPY currency pair declined 0.17% toÂ 106.96, from anÂ opening ofÂ 107.15, atÂ 16:07 GMT onÂ Wednesday. TheÂ EUR/JPY fell 0.32% toÂ 115.86, from anÂ opening ofÂ 116.21.
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