March 18, 2020

Akahata editorial (excerpts)


The Bank of Japan on March 16 announced additional monetary easing measures as the spread of the new coronavirus is creating turmoil in the financial market. This announcement came after the U.S. Federal Reserve Bank decided to lower interest rates to zero. The BOJ’s measures, which are mainly aimed at maintaining stock prices, will not work to stop the slowdown of Japan’s real economy.

According to the announcement, Japan’s central bank will buy 12 trillion yen worth of ETFs (exchange traded funds) per year, which is two times larger than the current yearly target of ETF purchase despite the fact that the BOJ has already bought a huge amount of ETFs under Prime Minister Abe Shinzo’s economic policies. In addition, the BOJ will increase the purchase target for large corporations’ commercial papers and bonds by two trillion yen.

However, the reason for why the economy is suffering is because the new coronavirus is seriously hindering the movements of people and goods and hampering economic activities, not because the money supply is insufficient. There is a glut of funds in the financial market as a result of the BOJ’s monetary relaxation policy which has been in place for nearly seven years.

The BOJ has injected a large amount of money into the financial market. This money, however, has not flowed to actual economic activities. This is because the Abe government raised the consumption tax rate from 5% to 10% in stages in the last five years, which discouraged people from spending money and companies from making capital investments. Furthermore, the coronavirus crisis delivered a hard blow to the economy.

Japan’s real economy is entering a severe recession. What the government should do now is to take measures to boost domestic demand and support households and small- and middle-sized enterprises by such means as lowing the consumption tax rate to 5%.