© Reuters. FILE PHOTO: An epidemic caused by coronavirus (COVID-19) broke out in Tokyo
By Leika Kihara
TOKYO (Reuters) – The cancellation or postponement of the Tokyo Olympic Games will likely not have much impact on the Japanese economy, but may require the government to provide targeted assistance to small businesses affected. enjoyed heavily, said a senior official of the International Monetary Fund.
While the government plans to proceed as expected, the spike in coronavirus infection and slow vaccine rollout has increased concerns about the fate of the Olympics, which are expected to begin. July after being delayed from last year.
Odd Per Brekk, IMF deputy director for Asia and Pacific, said: “A change to the Olympic agenda will have a limited impact on the overall growth outlook in the short term. for example, since Japan is a large and diverse economy.
Most of the infrastructure needed for the Olympics is already in place and the impact on growth from the evaporation of domestic tourism will be minimal, he added.
“That said … we should note that the cancellation of the Olympics will have a disproportionate impact on the service sector in Tokyo, especially between small and medium companies,” he told Reuters in a written interview on Tuesday.
The government may need to support such companies, as survey-based analysis suggests that canceling the Olympics could slow their sales growth by more than 5%, he added.
The Japanese economy has emerged from last year’s slump caused by the pandemic, though analysts expect any recovery to be modest given the new spike in diseases. Infections affect consumption.
The pandemic continued to delay the achievement of the Bank of Japan 2% inflation target, forcing the Bank of Japan in March to take a look at its tools to make them sustainable. than.
Brekk welcomes the BOJ policy review to include “steps in the right direction” to address the cost of extended easing.
However, inflation will stay below 2% in the medium term, due to the impact of the pandemic and low potential growth of Japan reducing the impact of monetary easing, Brekk said.
“Going forward, it may be necessary to have a broader assessment of how to implement overall economic policies, including monetary, fiscal, structural and deregulation in implementing growth,” he said. be sustainable and reach the 2% inflation target ”.
As part of a review in March, the BOJ created a plan to compensate banks for the impact of negative interest rates.
The main purpose is to convince markets that, with such tools to deal with side effects, the BOJ can move interest rates deeper into subtractive territories to counter economic shocks.
However, Brekk said the possibility of BOJ raising negative interest rates is low.
“While the plan signals that the BOJ will be willing and able to go deeper with negative rates, and as such represents a helpful guide forward, we do not see a rate cut in the near future. , unless there is increased deflationary pressure. “