Photo/Illutration People enter the Bank of Japan headquarters in Tokyo on April 2, 2018. (AP file photo)

Japan’s central bank took emergency action Monday to help support the economy following the U.S. Federal Reserve’s decision to cut its benchmark interest rate to nearly zero percent.

The Bank of Japan announced after an emergency policy meeting that it will expand its purchases of stocks, bonds and other assets and provide zero interest, one-year loans to companies running short of cash to help the economy weather the impact of the virus outbreak.

After the Fed’s move Sunday, Bank of Japan Governor Haruhiko Kuroda called the meeting for Monday instead of Wednesday and Thursday as originally planned.

That kept share prices relatively steady in Tokyo early Monday while markets elsewhere plunged. But shares in Japan also fell after the BOJ announced its decision Monday. The Nikkei 225 index declined 2.5 percent to 17,002.04.

The BOJ is thought to have limited room for maneuvering after having cut its key policy rate to minus 0.1 percent several years ago as part of a massive, prolonged effort to use cheap credit to keep the economy growing. It also has been purchasing hundreds of billions of dollars worth of Japanese government bonds and other assets to help put more cash into the markets.

The unprecedented levels of “qualitative and quantitative easing” helped Japan end a long spell of deflation but did not boost growth as much as expected. With an aging and shrinking population, Japan faces an uphill battle in getting companies to invest in domestic manufacturing or boost wages. But the jobless rate has remained low because the number of workers is also on the decline.

Japan’s economy, the world’s third largest, contracted at a 7.1 percent annual pace in the last quarter and is expected to shrink further in this quarter given the shock from the coronavirus outbreak.

Early Monday, the BOJ, Bank of Canada, Bank of England, European Central Bank, Federal Reserve and Swiss National Bank announced a coordinated plan to increase cash in the markets using U.S. dollar “liquidity swap line arrangements,” offering U.S. dollars weekly in each jurisdiction with an 84-day maturity on top of the usual measures.

Apart from slashing the U.S. benchmark interest rate to near zero, the Federal Reserve said it was buying $700 billion in bonds to help smooth disruptions in the Treasury market.

The surprise intervention reflected that the Fed views the economy as being on the brink of recession and has signaled it will do all it can to minimize the blow to households, companies and the markets.

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