Japan’s central bank announced its first investment fund to fight climate change on Friday, as the government strives to meet its new goal of achieving carbon neutrality by 2050.
The program, which is expected to start this year, will succeed an existing program aimed at promoting economic growth more generally, the Bank of Japan said after a two-day policy meeting.
“The problems of climate change could have an extremely important impact on the evolution of economic activity and prices as well as on financial conditions from a medium to long term perspective,” said his policy statement.
“The bank believes that supporting private sector efforts on issues from a central bank’s perspective will help stabilize the macroeconomy in the long run. “
Financial support measures for businesses affected by the pandemic have also been extended for six months until the end of March 2022, a day after the government approved the lifting of the viral state of emergency in nine prefectures, including Tokyo.
Slightly looser “near-emergency” restrictions will be set in the capital and six other regions until July 11, less than two weeks before the start of the postponed Tokyo Olympics.
The expansion of business support was widely expected, said Naoya Oshikubo, senior economist at SuMi TRUST.
“Many businesses continue to suffer financially from the Covid-19 state of emergency in a number of Japanese prefectures, as well as the country’s low vaccination rates,” Oshikubo said ahead of the policy decision.
“The extended financial support program will be very effective in helping struggling small and medium-sized businesses in Japan, as the demand for business support loans is high,” he added.
The vaccine rollout in Japan started relatively slowly, but has accelerated in recent weeks. Just over six percent of the population is currently fully immunized.
The Bank of Japan left its monetary easing policy unchanged, reiterating that it “will closely monitor the impact of Covid-19 and will not hesitate to take additional easing measures if necessary”.
Earlier on Friday, official data showed consumer prices in Japan edged up in May for the first time in 14 months, largely due to a rebound in energy prices.
Japan has long struggled to hit a 2% inflation target seen as essential to revive the world’s third-largest economy, despite a barrage of stimulus packages and monetary easing.
Yoshiki Shinke, chief economist at the Dai-ichi Life Research Institute, said that “the BoJ is unable to tone down its easing policy” as demand in the service sector is still weak due to the pandemic.
Prime Minister Yoshihide Suga set a deadline of 2050 in October for Japan to become carbon neutral, significantly strengthening the country’s commitments on climate change.
The nation has struggled to reduce carbon emissions after shutting down reactors in response to the 2011 meltdown at the Fukushima nuclear power plant.
© 2021 AFP