In April 2020, the Bank of Japan (BOJ) declared it was ready to buy an unlimited amount of government bonds. This bold announcement did not impress the markets because the BOJ was already purchasing ¥80 trillion bonds annually to tackle a persistent deflation. Investors, moreover, were well aware that the bank was constrained. The bank had committed, much before the pandemic, to control the yield curve: to maintain the yield on the 10-year government bond at zero.[1]  This commitment was obviously limiting its room for maneuver during the pandemic.

Other measures the BOJ took was to: increase the limits on the purchases of long-term corporate bonds and short-term commercial paper to a total of ¥20 trillion per year;[2] and double its annual cap on the purchases of ETFs to ¥12 trillion. [3]  

The bank introduced a special fund to facilitate corporate financing.[4]  Through this fund it provided loans at 0% to financial institutions by accepting as collateral private debt, including household debt.[5]   

The BOJ claimed that these measures were necessary because Japanese companies faced difficulties in obtaining financing.  One must bear in mind, however, that, in comparison with other economies, borrowing rates were quite low in Japan all through the pandemic. Toyota, a car manufacturer, was able to borrow in April 2020 at 0.19%, a yield that seemed high only when compared with the ultra-low yield of 0.001% it paid before the pandemic.[6]

In terms of fiscal measures, Japan’s government handed out ¥100 000 ($930) to each and every citizen to cushion the blow inflicted by the pandemic. Given that Japan’s population was around 126 million in 2020, the program was expected to cost ¥12 trillion.[7] 

[1] Elli Louka, The Global Economic Order: The International Law and Politics of the Financial and Monetary System 147 (2020).

[2] BOJ, Enhancement of Monetary Easing, Press Release, Apr. 27, 2020, https://www.boj.or.jp/en/announcements/release_2020/k200427a.pdf.

[3] Id.

[4] BOJ, Enhancement of Monetary Easing in Light of the Impact of the Outbreak of the Novel Coronavirus (COVID-19), Press Release, Mar. 16, 2020, https://www.boj.or.jp/en/announcements/release_2020/k200316b.pdf.

[5] See supra note 2.

[6] The Central Bank that Ate Japan, WSJ, Apr. 20, 2020, https://www.wsj.com/articles/the-central-bank-that-ate-japan-11588026341.

[7] Abe administration talks up ¥100,000 payout, but who is eligible?, Japan Times, Apr. 18, 2020, https://www.japantimes.co.jp/news/2020/04/18/national/shinzo-abe-100000-payout-who-is-eligible/#.XqsKKKhKg2w.

[8] Louka, supra note 1, at 120-22.

[9] Id.

[10] Joanne Chiu, As its Economy Slows, China Embraces a Weaker Currency, WSJ, May 26, 2020, https://www.wsj.com/articles/as-its-economy-slows-china-embraces-a-weaker-currency-11590491068.

[11] Chong Koh Ping, A $100 Billion Breather: China Banks Give Borrowers a Coronavirus Debt Holiday, WSJ, Apr. 19, 2020, https://www.wsj.com/articles/a-100-billion-breather-china-banks-give-borrowers-a-coronavirus-debt-holiday-11587315600.

[12]Why has China’s Stimulus Been so Stingy?: Fighting with Shadows, Economist, Apr. 16, 2020, https://www.economist.com/finance-and-economics/2020/04/16/why-has-chinas-stimulus-been-so-stingy.

[13]  Nathaniel Taplin, The Case of the Missing Chinese Stimulus,  WSJ,  Apr. 6, 2020, https://www.wsj.com/articles/the-case-of-the-missing-chinese-stimulus-11586172909.

[14] Jacky Wong, China’s New Infrastructure Push Isn’t All New, WSJ, Apr. 23, 2020, https://www.wsj.com/articles/chinas-new-infrastructure-push-isnt-all-new-11587645996.

[15] Liza Lin, China Pours Funds into Tech Push, WSJ, June 12, 2020.

[16] Phill Swagel, Congressional Budget Office’s Current Projections of Output, Employment, and Interest Rates and a Preliminary Look at Federal Deficits for 2020 and 2021, Apr. 24, 2020, https://www.cbo.gov/publication/56335.

[17] Value of COVID-19 fiscal stimulus packages in G20 countries as of April 2020, as a share of GDP, https://www.statista.com/statistics/1107572/covid-19-value-g20-stimulus-packages-share-gdp/.

[18] Jonathan Cheng, China Records First Ever Contraction in Quarterly GDP on Coronavirus, WSJ, Apr. 17, 2020, https://www.wsj.com/articles/china-set-to-report-plunge-in-first-quarter-gdp-11587086697.

[19] The Dollar’s Dominance Masks China’s Rise in Finance:  Bucking the Trend, Economist, Apr. 16, 2020, https://www.economist.com/finance-and-economics/2020/04/16/the-dollars-dominance-masks-chinas-rise-in-finance.