Haruhiko Kuroda, governor of the Bank of Japan, said that the bank will consider extending its epidemic relief program beyond the current September deadline if necessary, as the country suffers from a spike in cases of coronavirus, which is disrupting the economy.
Kuroda added that the world's third-largest economy is still on its way to recovery, as strong exports and corporate profits have offset some of the damage the epidemic is doing to consumption. But he warned that there is significant uncertainty about the pace of vaccine rollouts, which could do a longer-than-expected damage to the economy.
Last year, the Bank of Japan stepped up asset purchases and set up a loan program aimed at directing funds to cash-strapped small businesses to cushion the impact of the epidemic crisis. While large manufacturers benefiting from strong external demand have repaid some loans, small retailers are still under pressure as activity restrictions to prevent the spread of the virus harm consumption.
With Japan lagging other major economies in containing the epidemic, many analysts expect the Bank of Japan to decide on extending the program either at its meeting next month or in July.
Earlier the data showed that the Japanese economy contracted more than expected in the first quarter, with the slow introduction of the vaccine and the impact of consumption due to new infections with the Coronavirus. Capital spending also fell unexpectedly, and export growth slowed sharply.
"The near-term focus would be to respond to the pandemic’s impact," Kuroda added, noting that Japan will lag far behind other central banks in withdrawing the stimulus measures.