With novel coronavirus infections continuing to aggravate the economy, the government and the Bank of Japan have come up with additional stimulus measures, but the authorities must also consider the pandemic’s long-term effects.

At its policy meeting on April 27, the central bank decided to increase funding to support cash-strapped private enterprises and households.

This entails the issuance of more government bonds to fight the pandemic, and the BOJ is committed to purchasing “necessary amounts of government bonds without setting an upper limit” to eliminate any future pressure to raise long-term interest rates.

Acknowledging the extremely critical state of affairs, BOJ Governor Haruhiko Kuroda vowed that his organization will do “anything to the utmost of its ability.”

According to the BOJ’s policy committee members, the real growth rate for fiscal 2020 is estimated at between minus 3 and minus 5 percent.

Amid this unprecedented crisis, the mobilization of an all-out fiscal-monetary policy is only to be expected. Failing to be proactive and getting trapped in a vicious cycle would only aggravate the situation and lead to irreparable consequences.

Are the BOJ’s decisions actually being followed and serving their intended purposes? Are commercial financial institutions functioning properly so that the funds are getting to small and midsize businesses? The central bank must accurately assess every situation, act flexibly, and discuss policies that need tweaking to ensure their smooth implementation.

Removing the limit to bond purchases may weaken the government’s controls on fiscal expenditure. Even if that is necessary for the short term, the sustainability of mid- to long-term fiscal policy must still be kept in mind.

In that sense, the question now is how long this situation will continue.

Thanks to various measures being taken by the governments and central banks of nations around the world, the monetary market is maintaining relative stability. But there is no telling when the spread of the pandemic will be brought under control.

During a “normal” economic downturn, it would suffice to temporarily prop up demand with monetary-fiscal policies and wait for investment and consumption to recover.

But now, both demand and supply are intentionally being curbed to prevent the spread of COVID-19.

Such being the case, it is important to try to reduce the negative impact on the economy by focusing, for the time being, on treating the disease and preventing new infections.

But at the same time, the nation should also be prepared for a prolonged crisis.

Should the real economy continue to shrink, even major corporations would experience funding shortages, in which case the worst that could happen would be a synergic deterioration of the real economy and the financial sector.

In the event of prolonged supply and demand restraints, how can people’s living standards be prevented from plummeting?

The government must work out an equitable formula for distributing subsidies for income losses so that the worst economic hardships will not be concentrated on non-full-time workers.

Ideally, surplus productivity should be directed at meeting digitalization and health care needs that do not conflict with the prevention of infections. But that will not be easy to realize when market functions are restrained.

Aside from dealing with the immediate crisis, the nation’s leaders must see far ahead and come up with bold, viable plans.

--The Asahi Shimbun, April 29