Bank of Japan likely to expand its stimulus measures

Bloomberg

The Bank of Japan (BOJ) will likely expand its stimulus measures at its next meeting as it seeks to limit the blow from the coronavirus outbreak and reassure volatile markets.
The central bank is likely to show a more aggressive stance on buying assets such as exchange-traded funds (ETFs), the people said. Whether the BOJ will raise its 6 trillion yen ($58 billion) ETF-purchasing target remains unclear and could depend on the severity of market conditions at the time of the meeting, they added.
To offer support to companies struggling from the impact of the virus, the BOJ will likely offer a set of measures including a loan program, the people said. The bank may also adjust its purchasing of commercial paper and corporate bonds to help firms.
Lowering the bank’s negative interest rate still remains unlikely without a sharper deterioration in markets, given the additional pressure it would put on the banking sector.
Prime Minister Shinzo Abe met Kuroda for their first face-to-face discussion since September, an encounter that is likely to fuel expectations that central bank will act next week.
BOJ officials are well aware of the larger-than-expected moves of some of its global central banking peers and the possible disappointment the BOJ risks if its measures are seen as limited, the people said.
Memories remain fresh for the BOJ in its crisis response. In comparison with other major central banks in the wake of the global financial crisis, the bank was seen doing too little, too late, triggering a jump in the yen and a further deterioration of the economy. The bank is likely determined not to repeat history.
Still, there is cautiousness within the bank to commit to a higher ETF-buying target that will be difficult to lower in the future, especially given existing flexibility in how much the BOJ can increase its ETF purchases in the short term.
Following an emergency statement by the governor last week, the BOJ has already stepped up its daily ETF purchases. It bought 101.4 billion yen of the stock funds on March 12— a daily record — for the fifth time this month.