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BOJ policymakers voice concerns over possibility of slow recovery

This Dec. 12, 2019 photo shows the Bank of Japan head office in Tokyo. (Kyodo)

TOKYO (Kyodo) -- Japan's economy is on course to make a recovery, but it is likely to be slow in coming due to the lingering effects of the coronavirus pandemic, a summary of opinions from the Bank of Japan released Monday showed.

    "Even in fiscal 2022 (through March 2023), the economy is unlikely to return to the level reached before the outbreak of COVID-19," the respiratory disease caused by the virus, one of the nine Policy Board members said at the July 14-15 policy meeting.

    The member said, "it will take time for a structural change (to be achieved) through which the economy can overcome the impact of COVID-19."

    The central bank released its quarterly economic and inflation outlook report following the two-day policy meeting, saying the country's economy is expected to shrink 4.7 percent in fiscal 2020 but grow 3.3 percent in fiscal 2021.

    However, another policymaker expressed caution, warning that another wave of the pandemic would further damage the economy.

    "We cannot be optimistic about the timing of an economic recovery since it will be delayed further if COVID-19 spreads again," the member added.

    A policymaker pointed out that if the impacts of the coronavirus pandemic linger for an extended time, it would further damage company and household finances.

    "As time passes, the solvency problems of households and firms could materialize, employed persons not at work may become unemployed, and a vicious cycle from unemployment to less income and spending would emerge," the member said.

    As for the inflation outlook, many policymakers shared the view that the consumer price will not pick up immediately due to the impact of the pandemic, although the BOJ has maintained its 2 percent inflation target.

    "With the pace of economic recovery being moderate, it is unlikely that prices will regain the momentum toward 2 percent inflation within the projection period" through fiscal 2022, one member said.

    At the latest meeting, the central bank decided to maintain its corporate support measures totaling 110 trillion yen ($1 trillion) including interest-free loan programs for companies and corporate bond and commercial paper purchases.

    The summary of opinions is compiled by Governor Haruhiko Kuroda and does not attribute comments to individual members.

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