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TOKYO (MNI)

Bank of Japan officials are worried that the suspension of the Go To Travel subsidy will increase upward pressure on credit costs as non-manufacturers that are hardest hit by coronavirus benefitted from the subsidy, MNI understands.

Credit costs have been contained so far as manufacturing businesses are recovering with solid demand for goods. At the latest branch managers' meeting, bank officials judged that the subsidy helped sales and profits at non-manufacturers.

The government has declared a state of emergency for 11 prefectures and suspended the Go To Travel Campaign until Feb 7. Should the government decide to extend the emergency, the number of firms that close businesses would increase and concern over corporate financing would revive.

Japan's economy continues to be pressured by weak private consumption although demand for goods and exports remain solid.

The impact of the emergency is limited to eating and drinking services and accommodation, but the BOJ's view is that if the worsening sentiment at firms and households expands, it would weaken other spending.

MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com