COVID-19 has wrought havoc on stock markets worldwide, having resulted in a drop of over 29% in the S&P 500 in less than a month (meanwhile, real estate investors are sitting pretty; the values of their investment property and the rents they receive have been largely unchanged). It’s getting to the point in which central banks around the world are trying to bail out the economic victims of COVID-19 (also known as “novel coronavirus”). Some want to support the workers themselves; others would prefer to support the companies, and hope that the companies support their workers. Which camp does Japan fall into?
The answer is that Tarō Aso, the Japanese finance minister, has announced that the Japanese government will provide businesses that have been victimized by COVID-19 with loans. These loans will last one year, and have an interest rate of 0%. At the top of the list will be financial institutions, e.g. banks.
Mr. Aso told this to reporters on Monday, just after meeting with senior bank leaders/officials. In the meeting, he requested that they provide loans to businesses to alleviate the effects of COVID-19. He seemed more optimistic about the crisis, emphasizing that the novel coronavirus epidemic isn’t squeezing liquidity as much as the financial crisis in late 2000s and early 2010s, and saying “I requested both public and private banks to make absolutely sure to support financing to corporations.”
Two measures that The BOJ (Bank of Japan) took on Monday were as follows:
- They eased monetary policy. This showed up as a weaker yen.
- They promised to buy assets more aggressively, in a less conservative fashion. For example, they’ll buy ETFs (Exchange-Traded Funds) at twice the rate that they currently do.
Businesses are hurting, though, and will these measures be enough? On the other hand, in the real estate sector, tenancy rates continue to be 98~98% in the 23 Special Wards of Tokyo, and rents and therefore ROIs (returns on investment) continue to be high.