Japan's finance minister, central bank governor meet on pandemic response

Japanese Finance Minister Taro Aso and BOJ Governor Haruhiko Kuroda

TOKYO (Reuters) - Japanese Finance Minister Taro Aso and Bank of Japan Governor Haruhiko Kuroda met in Tokyo, the finance ministry said on Friday, in a show of resolve to coordinate policies to combat the widening economic fallout from the coronavirus pandemic.

The rare bilateral meeting came hours after an emergency BOJ rate review at which the central bank decided to create a new loan scheme to channel more funds to small businesses hit by the coronavirus.

The pair’s first such meeting in nearly four years underscores the concern Tokyo has over the growing risk that without firmer policy steps, the pandemic could lead to a spike in bankruptcies and job losses that may leave a lasting scar on a fragile economy.

Japan slipped into recession for the first time since 2015 in the first quarter of the year, putting the economy on track for its deepest slump in the postwar period as the health crisis shuts down businesses and consumer spending.

Aso and Kuroda frequently interact in parliament, on government panels and at international meetings. But it is their first official one-on-one meeting since 2016, when Britain’s surprise vote to exit the European Union jolted markets.

Central banks around the world have slashed interest rates and pumped out huge amounts of money to finance massive spending packages to cushion the blow from the pandemic.

The BOJ expanded its stimulus in March and April, ramping up risky asset buying and pledging to buy as many government bonds as needed to cap long-term borrowing costs at zero.

For its part, the government is set to unveil next week a fresh batch of spending measures to combat the virus fallout, on top of the record $1.1 trillion yen stimulus package it announced in April.

While the government has lifted the state of emergency put in place in most prefectures that led to infection numbers stabilising, some regions including the Tokyo metropolitan area still have restrictions in place. Those measures are due to be reviewed next week.

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