Asian Japan market review: Fears grow over Japan’s longer-term outlook

As the coronavirus intensified its grip, officials at the Bank of Japan increased monetary stimulus measures in an emergency meeting in a bid to soothe investors’ jitters. BoJ policymakers are worried that the economic crisis caused by the virus could push Japan’s economy into recession.


  • Japan postponed the summer Olympic Games
  • Australia cut its key interest rate twice in under three weeks
  • The Bank of Korea eased borrowing conditions

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As the coronavirus intensified its grip, officials at the Bank of Japan (BoJ) increased monetary stimulus measures in an emergency meeting in a bid to soothe investors’ jitters. BoJ policymakers are worried that the economic crisis caused by the virus could push Japan’s economy into recession; the country’s economic growth was faltering even before the virus began to spread, undermined by a general global slowdown as well as an increase in consumption tax in October and growing fears over the likelihood of recession were compounded by the government’s decision to postpone this summer’s Olympic Games. Prime Minister Shinzo Abe pledged to make “every effort” to contain the virus, promising: “Afterwards, we will implement bold and strong economic and fiscal policies to return the Japanese economy to a stable growth path, aiming at a V-shaped recovery”.

“We will implement bold and strong economic and fiscal policies” (Japanese PM Shinzo Abe)

The Nikkei 225 Index fell by 10.5% during March and by 20% over the first three months of the year. In comparison, the Topix Index declined by 7.1% during March and by 18.5% during the first quarter, and the TSE Second Section Index fell by 13.7% over the month and by 28.1% over the first quarter.

The Reserve Bank of Australia (RBA)  cut its key rate twice in less than three weeks to a fresh all-time low of 0.25%, and indicated that interest rates are likely to remain unchanged for some time. The RBA also introduced quantitative easing measures for the first time. RBA Governor Philip Lowe warned that the coronavirus represented “a major economic problem, which is having deep ramifications for financial systems around the world … Understandably, our communities and our financial markets are both having trouble dealing with a rapidly unfolding situation that they have not seen before”. Australia’s government announced measures to support jobs and businesses as they attempt to deal with the impact of the virus. The ASX All Ordinaries Index fell by 21.5% during March and by 24.9% over the first quarter.

South Korea’s central bank cut its key interest rate by 0.50 percentage points to 0.75% in a move designed to alleviate the impact of the coronavirus. Officials at the Bank of Korea (BoE) also implemented additional measures to ease borrowing conditions for companies. The Kospi Index fell by 11.7% during March and by 20.2% over the year to date.


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