According to Haruhiko Kuroda, Bank of Japan’s Governor, the focus remains on ameliorating the devastation that was dealt to the economy as a result of the pandemic. This comes from the Governor amid much talk about weak inflation in the economy.
The Effect of COVID-19 on the Japanese Economy and Recovery Measures
Kuroda also said that any rebound in inflation will likely remain moderate. This is due to reduced domestic demand, coupled with the unwillingness of companies to transfer higher raw material costs to consumers.
Also, the shutdown of factories in Southeast Asia, which is attributed to the effect of the COVID-19 pandemic on manufacturers, will lead to a temporary reduction in exportation and output growth, he added.
Therefore, while alluding to the fact that the continuous bouts of the pandemic have affected the Japanese economy, Kuroda says the disruptions to the supply chains will only last for a short term and that recovery is already underway. It will be more visible with time as the pandemic impact wears away.
The Bank of Japan under yield curve control has pledged a -0.1% guide to short-term interest rates and around 0% for 10-year bond yields. This will be through printing money aggressively.
Bank of Japan to Extend Programs to Ease Companies’ Funding Situation
Some companies have improved their funding conditions, while most of those offering interpersonal services are still in deplorable conditions. As a result, the BOJ intends to cushion funding strains for these pandemic-affected companies by extending some of its programs until March 2022.
Kuroda concluded by saying that the unpredictability of the Delta variant means the Bank of Japan will keep as its utmost priority for the time being its focus on ameliorating the effects of the Pandemic.
Market Reaction
The dollar-yen remains mainly subjected to the outcome of the United States Treasury yields. The currency pair remains in a decline as of today, Monday. It fell 0.09% to around 110.62.
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