BOJ maintains ultraloose monetary policy to support virus-hit economy

The Bank of Japan maintained Thursday its ultraloose monetary policy as widely expected, but it gave a slightly better assessment of the coronavirus-hit economy as Governor Haruhiko Kuroda looks set to work with the country's new prime minister through the crisis. At the end of its two-day policy meeting, the central bank maintained short-term interest rates at minus 0.1 percent while guiding long-term rates to around zero percent. It will also continue with measures to facilitate fundraising by struggling companies. "Japan's economy has started to pick up with economic activity resuming gradually, although it has remained in a severe situation due to the impact of the novel coronavirus at home and abroad," the BOJ said in a statement, a day after the Cabinet under Prime Minister Yoshihide Suga was launched. The BOJ, which previously said the economy is "in an extremely severe situation," made the latest assessment as exports and industrial output have "turned to a pick-up." With economic activity resuming, the BOJ said the economy is likely to "follow an improving trend." The policy meeting came amid persisting uncertainty over the impact of the pandemic that led the Japanese economy to shrink a record 28.1 percent at an annualized rate in the April-June quarter. Under its massive asset-buying program, the BOJ will continue buying government bonds from financial institutions without setting a limit and exchange-traded funds at an annual pace of 12 trillion yen ($114 billion). The BOJ maintained support measures for corporate finance, including providing cheap funds to banks that extend interest-free loans to struggling companies under a government program and buying up to 20 trillion yen in corporate bonds and commercial papers from lenders to ensure ample liquidity in the banking system. Kuroda is scheduled to meet the press to explain the policy decision with financial markets looking for clues as to the future of monetary policy under Suga, who took office on Wednesday. Suga has vowed to place priority on fighting the virus and boosting the economy, inheriting his predecessor Shinzo Abe's "Abenomics" policy mix that entails bold monetary easing by the BOJ, fiscal stimulus and structural reforms. The BOJ had joined Abe's efforts to beat chronic deflation in Japan and launched unprecedented monetary easing programs to lift the country's inflation rate to 2 percent. The goal is still far off with the latest figure showing that core consumer prices, excluding fresh food items, were unchanged in July from a year ago. Other central banks are also scrambling to ramp up support for their ailing economies. The U.S. Federal Reserve indicated Wednesday that interest rates will be near zero at least through 2023 after a two-day policy meeting. The coronavirus pandemic has made the challenge for the BOJ all the more complicated as Japan struggles to contain the spread of the coronavirus. The BOJ has eased its monetary policy twice this year as the virus spread. In a symbolic move, the central bank removed a limit on government bond-buying, which was set at 80 trillion yen annually. Related coverage: Suga becomes Japan PM, forms continuity Cabinet as Abe era ends FOCUS: Early election may be key to keeping Suga gov't afloat beyond 2021 Suga's continuity policy gives market firm footing, focus now on snap poll