Declaring Japan's economy "is in an increasingly severe state" due to immense economic losses from COVID-19, Haruhiko Kuroda, governor of the Bank of Japan (BOJ), said the central bank will do "whatever it can" to defeat the ongoing economic crisis.
Testifying before the Japanese Diet or Parliament, Kuroda on Tuesday also warned a collapse in a global activity such an economic depression will do huge damage to Japan's economy.
"Japan's economy is in an increasingly severe state," asserted Kuroda. "The outlook will remain severe for the time being."
He said the best Japan can do "is to take steps to smoothen corporate financing and stabilize markets. We will do whatever we can as a central bank, working closely with the government."
Doing "whatever we can" has thus far meant boosting monetary stimulus for the second straight month in April by accelerating risky asset purchases. BOJ has also pledged to buy an unlimited amount of bonds to keep borrowing costs low.
Kuroda noted the BOJ's monetary easing steps are helping ease corporate funding strains and somewhat calm nervous markets. On the other hand, he warned the outlook for Japan's economy is "highly uncertain" and depends on the pandemic being contained. Unfortunately for Japan, the risks are skewed to the downside.
This open-ended commitment by BOJ to do everything within its power to prevent further economic decline is aimed at preventing Japan from falling into an economic recession within the year as many analysts predict.
The Japanese government is also paying particular attention to the plight of Japan's motor vehicle industry, a major economic growth driver. Chief Cabinet Secretary Yoshihide Suga said the government will use all available tools to help Japan's car and auto parts makers reeling from almost non-existent demand and factory shutdowns caused by the coronavirus crisis.
Some analysts now predict a drop in annual global vehicle sales by around a third compared to an 11% fall in 2009/10 after the Great Recession.
"The industry is suffering deeply from sluggish U.S. and European sales, and suspension in domestic output," said Suga. "We'll deploy all policy means to assist in their accessing funding," such as through financial aid and payouts.
Toyota Motor Corporation, Japan's largest carmaker, expects profit to plummet 80% during the full year to its lowest in nine years. Toyota expects to lose a massive $13.95 billion in global vehicle sales this year due largely to COVID-19.
