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Senior Economist at UOB Group Alvin Liew assessed the recent BoJ event and the prospects of extra easing by the central bank in the next months.

Key Quotes

“In its unscheduled Monetary Policy Meeting (MPM) on Friday (22 May), the Bank of Japan (BOJ) as widely expected, kept all of its existing monetary policy easing measures unchanged from the 27 April 2020 MPM.”

“The reason for the emergency MPM is to introduce a new fund-provisioning measure to further support financing mainly of small and medium-sized firms/enterprises (SME).”

“The BOJ will call the three measures, the Special Program to Support Financing in Response to the Novel Coronavirus(COVID-19) (i.e. the Special Program, which will amount to about JPY 75 trillion).”

“With the expansion of the program to help SMEs, the BOJ is likened to have created its own version of the US Federal Reserve’s “Main Street” lending program to channel funding to small businesses, as part of a broader scheme to save companies and to keep the COVID-19 pandemic from pushing the economy deeper into recession.”

“We have long held the view that the BOJ will resume its monetary easing in 2020 and we still expect the BOJ to do more. We believe the central bank will ease further down the road via deepening its negative policy call rate to -0.2% (from -0.1%), with potentially other measures to follow if the domestic economic situation turns even more dire which it most likely will, with the latest plunge in exports and industrial production.”