Bank of Japan member calls for ‘swift action’ to ease coronavirus shock

A pedestrian wearing a face mask walks in front of the Bank of Japan headquarters in Tokyo. (AFP)
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Updated 22 October 2020

Bank of Japan member calls for ‘swift action’ to ease coronavirus shock

  • Japan’s economy suffered its biggest postwar slump in the second quarter

TOKYO: Bank of Japan board member Makoto Sakurai said on Wednesday the central bank must take “swift and appropriate” action if the coronavirus shock delays the country’s economic recovery.

If the pandemic takes longer than expected to contain, more companies could be pushed under, saddling commercial banks with bad loans and threaten Japan’s financial system, he said.

“At present, financial institutions have sufficient capital so there is no big concern over Japan’s banking system. But we need to be prepared to take swift action, with a close eye both on the economy and the banking system,” Sakurai said in a speech to business leaders in Fukui prefecture.

The remarks came ahead of the BOJ’s rate review next week, when the central bank is likely to cut its growth and price forecasts, but leave monetary settings unchanged.

They also underscore a growing concern in the BOJ over the additional pain COVID-19 could inflict on commercial banks, many of which are suffering from years of ultra-low interest rates.

“If Japan’s economic recovery is delayed, that could hurt growth and the banking system. As such, it’s critical for us to act swiftly and appropriately as needed in coordination with the government and other central banks,” Sakurai said.

Japan’s economy suffered its biggest postwar slump in the second quarter. Analysts expect any rebound to be modest as uncertainty over the outlook weigh on consumption and capital spending. Sakurai said while Japan’s economy was likely to gradually recover, it remained in a severe situation.

Inflation may also not accelerate much for some time, as companies cope with a tight labor market with automation rather than wage hikes, he added.


Saudi PIF seeks investment flexibility with $5 billion-plus loan

Updated 04 December 2020

Saudi PIF seeks investment flexibility with $5 billion-plus loan

  • The loan finances are for use if and when the fund identifies investment opportunities 
  • PIF  is at the heart of the Kingdom’s strategy of economic diversification under its Vision 2030 reform plan

DUBAI: The Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund, is in talks with bankers to raise a loan of between $5 billion (SR18.75 billion) and $7 billion to provide flexibility in its investment strategy.

The PIF has declined to comment on reports of the loan, said to be in the form of a revolving facility from a number of international banks, but sources said it was part of the fund’s regular financing arrangements, which have seen it take out and repay facilities for the past two years.

The loan finances are for use if and when the fund identifies investment opportunities and may not necessarily be used.

The PIF has been opportunistic during the coronavirus pandemic in identifying what it saw as undervalued assets on global stock markets and has been an active trader in securities on international markets.

The fund invested $7 billion in mainly US stocks in the first quarter of the year, when markets were first impacted by pandemic lockdowns, and increased and diversified that in the second quarter. It scaled back its commitments in the third quarter when asset values were near all-time highs. In the summer, it spent $1.5 billion to acquire a stake in the Indian digital business Jio Platforms.

PIF, under governor Yasir Al-Rumayyan, is at the heart of the Kingdom’s strategy of economic diversification under its Vision 2030 reform plan, while simultaneously building an international portfolio of assets.

Earlier this year, PIF repaid a $10 billion syndicated loan ahead of schedule after it completed the sale of its stake in SABIC to Saudi Aramco, and in 2018 it raised an $11 billion term-loan facility from international banks.

Previous fundraisings were done in partnership with a group of 10 banks from the US, Europe, and Asia that form part of the fund’s “core banking relationships.”