Japan COVID-19 Stimulus Package And Government Response

How has Japan responded to the COVID-19 pandemic that swept across the globe starting in early 2020? Let's explore the Bank of Japan and the government's tactics to help out the economy.

Bank Of Japan

Japan's central bank, the Bank of Japan (BOJ), has been one of the world's most proactive in monetary accommodation and asset purchases, both governmental and private securities, bonds as well as stocks, since the 2008 global financial crisis. It has only increased its response since the outbreak of the coronavirus.[1]

Enhances Monetary Easing

On 16 March 2020 the BOJ announced it would "enhance monetary easing" by providing "more ample yen funds" for the purchase of Japanese government bonds in order to maintain the yield on the government's 10-year bond at 0%.[1]

The BOJ together with the central banks of Canada, the U.K., the U.S. and Switzerland and the European Central Bank said it would "do its utmost" to provide U.S. dollar liquidity by reducing the loan rate on U.S. dollar loans by 25 basis points and offer U.S. dollars weekly with an 84-day maturity, on top of the one-week maturity it already offered.[1]

New Business Loan Program

The bank announced a new business loan program called the "Special Funds-Supplying Operations to Facilitate Financing in Response to the Novel Coronavirus" that would provide about 8 trillion yen of 0%, one-year loans to businesses collateralized by corporate debt.

Additionally, the BOJ said it would increase its purchases of commercial paper and corporate bonds by two trillion yen to about 3.2 trillion yen for CP and 4.2 trillion yen for corporate bonds. It also said it would increase its purchases of Japanese exchange-traded funds and real estate investment trusts.[1]

Increase In CP And Corp Bonds

On 27 April the bank voted to "significantly increase" the maximum amount of CP and corporate bonds it would buy to about 20 trillion yen in total. It also said it would "raise substantially" the maximum amounts of CP and bonds it would buy from a single issuer and extend the maximum maturity of bonds it would buy by five years.[2]

The BOJ said it was "strengthening" its new business lending program by accepting as collateral "private debt in general, including household debt," to back the loans, which would increase the size of eligible collateral from about 8 trillion yen to about 23 trillion. It also said it was raising to a positive 0.1% the interest rate it pays on bank deposits held at the BOJ that correspond to the amount of loans the banks make under the program, essentially paying the banks to make loans.[2]

On 22 May the BOJ voted to increase its purchases of CP and corporate bonds to 7.5 trillion yen for each asset.[3] The bank also introduced a new 30 trillion yen interest-free, unsecured loan program for small and medium-sized businesses. The total size of the business loan program is 75 trillion yen.[4]

Japanese Government

On 7 April the government announced a 117 trillion yen package—equivalent to 22% of GDP—dGDPesigned to stimulate the economy. About 75% of the package was earmarked for employment and business support.[5]

On 27 May the government announced another 117 trillion yen package that included the establishment of rent support benefits for small and medium-sized businesses and subordinated loans for large companies.[5]


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