Japanese Yen Strengthens on BoJ’s ‘Whatever We Can’ Approach to Rescue Economy

The  Japanese yen is strengthening against its G10 currency counterparts midweek, driven by  the  central bank’s signal that it would impose additional monetary stimulus to  save the  world’s third-largest economy. Investors were also bullish on  new data showing banks are increasing their lending programs. With Tokyo planning to  top up its $1 trillion stimulus efforts, could Japan avoid a  financial crisis in  the  aftermath of  the  coronavirus?

Bank of  Japan (BoJ) Governor Haruhiko Kuroda said on  Tuesday that the  central bank would do “whatever it can” to  prevent additional fallout from the  coronavirus pandemic. In  his semi-annual testimony to  Parliament, Kuroda noted that the  BoJ would use all available tools to  stimulate the  economy. He alluded to  money-printing, cutting interest rates, and  increasing market operation tools as  just some of  the  measures the  central bank could employ.
Kuroda did dismiss purchasing municipal bonds, something that many central banks have started doing.

What’s most important for  us 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.

Prime Minister Shinzo Abe and  his Cabinet confirmed that they are ready to  help the  country’s massive automobile industry that has been impacted by  global supply chain disruptions and  slumping demand. Chief Cabinet Secretary Yoshihide told reporters that it would use any available tool to  support the  nation’s vehicle and  parts makers, including direct financial assistance and  bailouts.

The  industry is suffering deeply from sluggish US and  European sales, and  suspension in  domestic output. We’ll deploy all policy means to  assist in  their accessing funding.

Abe has also promised to  unleash additional fiscal support on  top of  his record $1.1 trillion relief and  stimulus package. But this is unlikely to  include tax cuts due to  Japan’s ballooning public debt levels, says Finance Minister Taro Aso. The  prime minister is considering aid to  businesses struggling to  pay rent, corporate subsidies, and  support for  students who have lost part-time jobs.
Meanwhile, according to the BoJ, bank lending surged 3% last month over the same time a year ago. For the last 12 months, the value of loans has risen by about 2%. Foreign exchange reserves jumped $2.4 billion to a little more than $1.368 trillion in April.
The  Coincident Index came in  at  90.5 in  March, while the  Eco Watchers Survey clocked in  at  7.9 in  April.
The  USD/JPY currency pair declined 0.17% to  106.96, from an  opening of  107.15, at  16:07 GMT on  Wednesday. The  EUR/JPY fell 0.32% to  115.86, from an  opening of  116.21.
If you have any questions, comments, or opinions regarding the Japanese Yen, feel free to post them using the commentary form below.