Statement by KURODA Haruhiko, Governor of the Bank of Japan, concerning the
Bank's before the Committee
Semiannual Report on Currency and Monetary Control
on Financial Affairs, House of Councillors, on May 26, 2020
Introduction
The Bank of Japan submits to the Diet its Semiannual Report on Currency and Monetary
Control every June and December. I am pleased to have this opportunity today to talk about
recent economic and financial developments and present an overall review of the Bank's
conduct of monetary policy.
I. Economic and Financial Developments
I will first explain recent economic and financial developments.
The global economy has become depressed rapidly, reflecting the impact of the novel
coronavirus (COVID-19) pandemic. Economic activity has been disrupted significantly
worldwide as a result of preventive measures against the spread of COVID-19 taken by
each country and region, such as restrictions on going outside and immigration/emigration.
According to the latest World Economic Outlook released by the International Monetary
Fund (IMF), the global economy is projected to register large negative growth of minus 3.0
percent for 2020, which is worse than at the time of the global financial crisis.
Japan's economy also has been in an increasingly severe situation due to the impact of the
spread of COVID-19 at home and abroad, and for the time being, that is likely to remain the
case. The year-on-year rate of change in the consumer price index (CPI) is expected to be
somewhat weak for the time being, mainly affected by the spread of COVID-19 and the
decline in crude oil prices. Thereafter, as the impact of the spread wanes at home and
abroad, Japan's economy is likely to improve, supported by accommodative financial
conditions and the government's economic measures, as well as through the expected
materialization of pent-up demand and a projected recovery in production from the decline
brought about by the spread of COVID-19. The year-on-year rate of change in the CPI also
is expected to increase gradually. However, the outlook for economic activity and prices is
extremely unclear, as it could change depending on the timing of the spread of COVID-19
subsiding and on the magnitude of the impact on domestic and overseas economies, and
thus the Bank considers that risks are skewed to the downside.
Meanwhile, global financial and capital markets have become unstable rapidly since late
February with deterioration in investors' risk sentiment. As a result of swift and aggressive
responses taken by the government and central bank in each country and region, tension in
financial markets has abated somewhat. However, the markets have remained nervous due
to a decline in liquidity. In addition, although Japan's financial system has maintained
stability on the whole, financial conditions have become less accommodative in terms of
corporate financing, as seen in deterioration in firms' financial positions.
II. Conduct of Monetary Policy
Next, I will explain the Bank's conduct of monetary policy.
The Bank considers that the important thing in terms of monetary policy under the recent
economic and financial situation is to support financing mainly of firms and maintain
stability in financial markets. With this in mind, in March and April, it enhanced monetary
easing. Moreover, at the unscheduled Monetary Policy Meeting held on May 22, the Bank
decided to introduce a new fund-provisioning measure to further support financing mainly
of small and medium-sized firms.
The Bank has introduced and enhanced the following three measures since March: (1)
purchases of CP and corporate bonds, (2) the Special Funds-Supplying Operations to
Facilitate Financing in Response to the Novel Coronavirus (COVID-19), and (3) the new
fund-provisioning measure. Through these three measures, which are referred to as the
Special Program to Support Financing in Response to the Novel Coronavirus (COVID-19)
with the total size of about 75 trillion yen, it will actively support financing mainly of firms
while cooperating with the government. In addition, with a view to maintaining stability in
financial markets, the Bank has been providing ample yen and foreign currency funds
without setting upper limits mainly through purchases of Japanese government bonds
(JGBs) and the conduct of the U.S. dollar funds-supplying operations, and has been actively
purchasing assets such as exchange-traded funds (ETFs). By conducting these measures, it
will continue to contribute to supporting financing mainly of firms and maintaining stability
in financial markets.
The Bank recognizes that powerful monetary easing measures will contribute to supporting
economic and financial activities, coupled with various measures by the Japanese
government as well as those by the government and central bank of each country in
response to the spread of COVID-19.
On this basis, the Bank will closely monitor the impact of COVID-19 for the time being and
will not hesitate to take additional easing measures if necessary.
Thank you.