Bank of Japan policymakers debated the risk of the country sliding back into deflation but stopped short of advocating stronger steps to prevent firms from going insolvent due to the coronavirus pandemic, minutes of their June meeting showed.
With the impact of COVID-19 likely to last for a prolonged period, more companies could face the risk of insolvency even if they received immediate liquidity support, some on the BOJ’s nine-member board were quoted as saying.
“A few members said the BOJ’s role was to provide liquidity, and that it was important for the BOJ to cooperate with the government while clarifying the respective roles,” according to the minutes released on Monday. But many board members remained gloomy on Japan’s recovery prospects as the impact from the outbreak deepened, the minutes showed.“The impact of the pandemic was broadening to companies of all size and sectors. If corporate bankruptcies and closures increased, there was a risk Japan could slip back into deflation,” a few board members were quoted as saying.
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