Japan’s finmin rejects need for BOJ to take on debt for virus stimulus

TOKYO (Reuters) – Japan’s government does not plan to ask the Bank of Japan to fund its debt, which has been ballooned by stimulus spending to contain the economic fallout from the coronavirus, Finance Minister Taro Aso said on Friday.

FILE PHOTO: Japan’s Finance Minister Taro Aso arrives at the ceremony site where Emperor Naruhito will report on the conduct of the Imperial Shrine enthronement ceremony inside the Imperial Palace in Tokyo, Japan, October 22, 2019. REUTERS/Kim Hong-ji

Aso made the remark at a press conference after a cabinet meeting, when asked about media reports that the Bank of England would resort to direct underwriting of government debt to finance the cost of its stimulus against the coronavirus.

“We’re not thinking of BOJ debt financing at all,” Aso said.

“The BOJ buys government bonds (in the market) based on its own judgment. I believe the BOJ is taking such a step as part of its battle against deflation.

The BoE said on Thursday it had agreed to temporarily lend to the government, if needed, to help fund its massive COVID-19 spending plans, as central banks stepped up emergency responses to combat a probable global recession.

“I don’t believe Governor (Haruhiko) Kuroda was considering financing debt the same way as the BoE,” Aso said.

Sensitive to claims that it resorts to monetary financing or permanently supports public spending by printing money, the BoE stressed that its decision was a short-term measure and that any money borrowed would be repaid by the end of 2020. .

Prime Minister Shinzo Abe on Tuesday rolled out a nearly $1 trillion spending program to combat the fallout from the pandemic, with a plan to increase bond issuance to 147 trillion yen ($1.35 trillion). dollars), or 30% of the size of the Japanese economy, to finance the recovery.

The massive bond issuance could raise speculation that the BOJ could be forced to guarantee public debt by revising the law that prohibits such action.

The BOJ is now aggressively buying bonds in the market, effectively contributing to the financing of public debt, as part of its quantitative easing aimed at accelerating inflation to its elusive 2% target and reviving the growth.

The intensified bond purchases are part of the government and central bank’s efforts to support the economy in the face of growing pressure from the pandemic.

($1 = 108.8139 yen)

Reporting by Tetsushi Kajimoto; Editing by Muralikumar Anantharaman & Shri Navaratnam

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