Photo/Illutration Bank of Japan Governor Haruhiko Kuroda holds a news conference in Tokyo on March 16 after the central bank convened an emergency policy meeting. (The Asahi Shimbun)

The central banks of Japan and the United States have proceeded with further monetary easing. With the COVID-19 pandemic causing growing concerns about the future of the global economy, the government and monetary authority of every nation must stabilize financial markets to support the real economy.

At an emergency meeting on March 15, the U.S. Federal Reserve Board cut its benchmark rate by a full percentage point to zero and also decided to resume quantitative easing. This followed the Fed’s March 3 emergency move to cut the benchmark rate by 0.5 percentage point.

Also on March 15, six central banks in North America, Japan and Europe announced a coordinated action to expand dollar funds supply.

The Bank of Japan on March 16 convened a policy meeting ahead of schedule and decided to pursue further monetary easing. Specifically, this entails taking measures for reinforced corporate financing support and supplying plentiful funds to the markets by raising the purchase amounts of exchange-traded funds, corporate bonds and real estate investment trusts.

With the COVID-19 pandemic growing graver in Europe and the United States, we believe the BOJ and other central banks have done everything they could in terms of dealing with the spooked markets.

Some of the policies may cause certain “side-effects” in the future. But there was really no choice but to go ahead with them because nations of the world were starting to close their borders, and fears of a massive shrinking of economic activities were growing quite real.

The central banks around the world must continue to work in concert and ensure stable financing to stop a further expansion of credit uncertainty and avert a financial crisis.

In the meantime, the monetary authorities of Japan, the United States and European nations have already used up most of their ammunition, so to speak, to stimulate economies through monetary measures. This means that the shaping of macroeconomic policies must now rely more on fiscal plans.

Initially, projections of the novel coronavirus outbreak’s impact on the economy had mainly to do with decreased exports to China and fewer foreign tourists visiting the country.

But as the outbreak escalated into what is now recognized as a pandemic, countries around the world began to close their borders and resort to domestic measures, such as banning large gatherings, ordering citizens into self-quarantine, and shutting down restaurants, which have effectively cramped economic activities.

There are concerns that demand will decline due to deteriorations in consumer and corporate sentiments. And it is also highly possible that the need to prevent coronavirus infections will lead to further supply restrictions.

Steps need to be taken to ensure that the supply-demand shrinkage will not fall into a vicious cycle.

Aside from expanding measures to finance businesses that are forced into operational suspension and to protect the incomes of workers as needed, governments must opt for highly effective measures, such as those to compensate the earnings of low-income workers, and implement these measures immediately and on a large scale.

With no end in sight for the ending of the COVID-19 pandemic, the current economic uncertainty is deeper than for any normal economic downturn.

We need to brace ourselves for a possible long-term battle, during which it will be vital to share data and experiences with nations around the world and ensure that all medical and other needs of society’s vulnerable members are thoroughly met.

In the face of this crisis, international collaboration is indispensable if the world is to contain the spread of the pathogen and maintain its economic functions.

--The Asahi Shimbun, March 17

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