Japanese policymakers have pulled out all the stops in response to the Covid-19 crisis with a combined fiscal and monetary package harking back to the early days of Abenomics.
On the monetary front, the Bank of Japan has said it will increase its existing holdings of commercial paper and corporate bonds from around JPY 5tn to as much as JPY 20tn. At the same time, the central bank has abandoned its JPY 80tn cap on annual Japan Government Bond purchases.
On the fiscal front, measures introduced have been more impressive still – including interest-free loans and subsidies to companies to maintain their workforce and avoid lay-offs as well as compensation to companies that cooperated with the lockdown and experienced a decline in sales or revenue as a result. Individuals have also either received or are set to receive a one-off JPY 100,000-per person payment which they can use however they want.
It’s not a return to the type of stimulus employed in Japan in the 1990s and early 2000s which focused on physical infrastructure and assets. The impact of that kind of stimulus takes too long to feed into the economy. Instead, the focus is on direct financial support for companies and individuals most affected by lockdown.
Fortunately, Japanese unemployment still stands at less than 3% with a job offer to applicant ratio of 1.2, meaning there are still more jobs than seekers. On a positive note, and despite recent concerns, Japan also seems to have been considerably less hard hit by the Covid-19 pandemic than most other countries around the world.
Miyuki Kashima, Head of Japanese Equity Investment, BNY Mellon Asset Management Japan.