MNI POLICY: BOJ Kuroda Warns On 2nd-Round Covid-19 Effects

The Bank of Japan must watch closely to see if second-round effects of a shock from COVID-19 weigh further on the economy, Governor Haruhiko Kuroda said Wednesday.

"Specifically, whether the liquidity problem will shift to a solvency one and affect the financial system, thereby further pushing down the real economy, should be monitored. It also matters whether firms' and households' growth expectations will decline, leading to cautious spending attitudes," Kuroda told a Webinar hosted by the Center on Japanese Economy and Business at the Columbia Business School,

"The BOJ considers it important to continue providing support for financing and maintaining stability in financial markets by conducting the three measures, which have been effective," he said.

"Since the economic and financial impact of COVID-19 is highly uncertain, the BOJ, for the time being, will closely monitor this impact and not hesitate to do whatever it takes as a central bank if necessary," he said.

"At present, it seems possible to avoid these risks owing to the government's and the Bank's responses, but future developments warrant attention. Lastly, let me touch on the Bank's thinking on future conduct of monetary policy," he added

Kuroda noted that the spread of COVID-19 has not subsided globally, and "domestic and overseas economies remain in extremely severe situations."

"However, since many countries have been resuming economic activities gradually while containing the spread, the situation has changed slightly. In Japan, after the government lifted the state of emergency in late May, economic activity has resumed gradually," he said.

"If the strict public health measures are reinstated, economic activity could be constrained significantly again," he added