Mar 16 ,2020. 32 minutes ago – 16:35 KYODO NEWS

TOKYO – The Bank of Japan decided Monday to expand its asset purchase program in a bid to stabilize financial markets through increased accumulation of exchange-traded fund securities and corporate bonds.

The central bank will boost its ETF purchases to an annual pace of 12 trillion yen ($112 billion) from the current 6 trillion yen level while promising to lift its target of commercial paper and corporate bond purchases by 2 trillion, both by the end of September.

The BOJ also decided to employ a new operation to provide loans against corporate debt of about 8 trillion yen as of the end of February as collateral at the interest rate of zero percent with maturity of up to one year.

The BOJ introduced additional easing measures for the first time since July 2016 when it almost doubled its purchases of ETFs to an annual pace of about 6 trillion yen from around 3.3 trillion yen.

However, the bank refrained from further cutting short-term interest rates into negative territory, currently set at minus 0.1 percent, amid criticism that such monetary policy eats into commercial banks’ profits.

Gist of BOJ’s additional monetary easing

The BOJ:

— doubled its target for annual purchases of exchange-traded funds to 12 trillion yen to support Tokyo stocks.

— kept interest rates unchanged.

— pledged to provide ample yen liquidity to banks through its asset purchase program to help companies raise funds.

— will cooperate with other major central banks to supply dollar funds at lower costs and for longer maturities.

— downgraded its assessment of Japan’s economy, warning it “has been weak recently” due mainly to the outbreak.

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The BOJ suddenly convened a one-day policy meeting Monday following an emergency U.S. rate cut overnight to stabilize financial markets rattled by the spread of the new coronavirus.

“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,” it said in a statement released after the meeting.

In its outlook for the economy and price developments, the BOJ downgraded its basic view of the economy, saying, “Japan’s economic activity is likely to remain weak for the time being, mainly affected by the outbreak of COVID-19.”

In January, the BOJ maintained its view that “Japan’s economy is likely to continue on an expanding trend…through fiscal 2021.”

It also said in the statement that the consumer price index is “likely to be somewhat weak for the time being,” citing declining crude oil prices.

The BOJ moved forward what was originally scheduled to be a two-day gathering starting Wednesday, hours after the Federal Reserve’s decision to cut its target range for the federal funds rate by 1.00 percentage point to 0.00 to 0.25 percent, the lowest level since late 2015.

Six central banks, including the BOJ, the Fed and the European Central Bank, also said they will take coordinated action to enhance the provision of U.S. dollar liquidity.

Prime Minister Shinzo Abe said Monday leaders of the Group of Seven industrialized counties will hold an emergency videoconference from 11 p.m. Japan time to discuss their response to the global spread of the coronavirus.

The spread of COVID-19 has weighed on a wide range of economic activities in the tourism, retail and manufacturing sectors. The number of infections reported in Japan has topped 1,500, including about 700 cases from the Diamond Princess cruise ship that was quarantined near Tokyo.

BOJ Governor Haruhiko Kuroda said earlier this month in an emergency statement that the Japanese central bank will make every effort to provide ample liquidity and ensure stability in financial markets.

“We will not hesitate to take appropriate measures in a timely manner whenever needed,” he said after meeting with Abe on Thursday to discuss responses to the global market turmoil.

However, recent sluggish domestic economic data has increased pressure on the central bank to take additional steps.

Japan’s economy shrank an annualized real 7.1 percent in the October-December quarter, its sharpest fall in more than five years, due to a sales tax hike and a devastating typhoon last year.

Many analysts are concerned that the world’s third largest economy may post negative growth in the January-March period for the second consecutive quarter due to the coronavirus outbreak, which originated in China late last year.

CR: KYODO NEWS