haruhiko kuroda : the impact of covid - 19 on the japanese economy and the bank of japan's response remarks by mr haruhiko kuroda, governor of the bank of japan, at the virtual event co - hosted by harvard law school ( hls ) and the program on international financial systems ( pifs ), 26 june 2020. * * * introduction it is my great pleasure to have the opportunity today to participate in this virtual discussion. in my opening remarks, i will talk about the impact of covid - 19 on japan ’ s economy and the bank of japan ’ s response. the impact of covid - 19 on japan ’ s economy the covid - 19 pandemic has had a severe impact on countries all over the world, and japan is no exception. with the increasing number of confirmed cases, the japanese government declared a state of emergency in april and implemented strict public health measures. as economic activity became significantly constrained, private consumption for april declined by about 20 percent from last year. new cases of infection decreased sharply thanks to the public health measures, and the state of emergency was lifted at the end of may. the total number of confirmed deaths is less than 1, 000 in japan, and economic activity has resumed gradually. that said, given the significant economic downturn, japan ’ s economy is likely to remain in a severe situation for the time being. thereafter, as the impact of covid - 19 wanes globally in the second half of the year, japan ’ s economy is likely to improve, mainly on the back of pent - up demand and the effects of macroeconomic measures. of course, there are significant uncertainties over the outlook for the economy. the covid - 19 pandemic continues on a global basis, and concern about a second wave of the virus has increased recently. under these circumstances, there is a risk that the second - round effects of covid - 19 may push down the economy considerably. there are two important points in particular. the first is to ensure corporate financing. to this end, it is essential to maintain financial system stability and accommodative financial conditions, thereby avoiding further downward pressure on the real economy from the financial side. the second point is whether firms ’ and households ’ growth expectations will decline and lead to cautious attitudes toward spending. some sort of hysteresis effects could arise after a large shock, as shown in protracted cautious firms ’ behavior in japan after the

- 20 - 30 " unfavorable " - 5 - 10 large firms - 40 medium - sized firms - 15 small firms - 50 cy 07 09 11 13 15 17 19 21 23 cy 07 09 11 13 15 17 19 21 23 - 20 fy 08 10 12 14 16 18 20 22 24 notes : 1. in the left - hand chart, figures are based on the tankan. 2. in the middle chart, figures are current profits based on the financial statements statistics of corporations by industry, quarterly and exclude " finance and insurance. " figures from 2009 / q2 onward exclude pure holding companies. 3. in the right - hand chart, figures are based on the tankan, including software and r & d investments and excluding land purchasing expenses. r & d investment is not included before the march 2017 survey. figures are for all industries including financial institutions. sources : bank of japan ; ministry of finance. chart 3 i. economic developments household sector confidence indicators private consumption s. a., cy 2019 = 100 s. a. total real private consumption of which, services ( travel, dining - out, etc. ) of which, nondurable goods ( food products, clothes, daily necessities, etc. ) cy 19 improved consumer confidence index economy watchers survey ( household activity ) worsened cy 19 notes : 1. in the left - hand chart, figures for total real private consumption are the real consumption activity index ( travel balance adjusted ) based on staff calculations, which exclude inbound tourism consumption and include outbound tourism consumption. 2. in the right - hand chart, figures for the economy watchers survey are those for the current economic conditions di. sources : bank of japan ; cabinet office. chart 4 i. economic developments overseas economies imf projections in the world economic outlook update y / y % chg. imf projections real gdp growth in the united states ann., q / q % chg. - 2 - 4 cy 21 cy 1990 - 2019 average : + 3. 6 % - 1 - 2 - 3 cy 00 02 04 06 08 10 12 14 16 18 20 22 24 labor market in the united states 16 % cy 19 unemployment rate ( left scale ) ratio average hourly earnings ( y / y chg., left scale ) ratio of job openings to unemployment ( right scale ) 3. 5 3. 0 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 note : in the left - hand chart