Bank of Japan (BOJ) Governor Haruhiko Kuroda said the central bank was ready to extend its programmes aimed at easing corporate funding strains that expire early next year, as the coronavirus pandemic keeps the economic outlook highly uncertain.

He also reiterated the BOJ’s resolve to work closely with the government in battling headwinds to Japan’s recovery such as the fallout from US-China tensions and protectionism.

“There’s a good possibility we will extend the deadline for the programmes if needed, depending on the impact of COVID-19,” Kuroda told a news conference after his online meeting with business leaders in Osaka, western Japan, on Wednesday.

“We’ll make the decision at an appropriate timing and won’t wait until the last minute,” he added.

The BOJ ramped up purchases of corporate debt and created a lending facility to pump money to firms hit by COVID-19, as part of efforts to cushion the economic blow from the pandemic. Both programmes end in March next year, unless the BOJ’s board votes to extend the deadline.

“It’s true corporate funding remains tight. We’ll of course monitor developments carefully and take additional easing steps without hesitation if necessary,” Kuroda told the Osaka business leaders.

“We’d like to continue supporting corporate funding, working closely with the government,” he said.

Kuroda made the remarks after meeting Prime Minister Yoshihide Suga earlier in the day. It was their first meeting since Suga was elected as Japan’s new leader this month.

With the immediate hit from the pandemic easing, the BOJ kept monetary policy steady last week and upgraded its view on the economy to say it was starting to pick up.

Kuroda said the economy and prices were moving roughly in line with the BOJ’s latest forecasts made in July. But he warned that any economic recovery will be moderate with risks “skewed to the downside.”

“The shock exerted by the pandemic could push down corporate and household growth expectations, making them cautious about spending. That’s something we need to look out for,” he said.

Kuroda also said Japan’s consumer prices will likely keep falling for the time being due mostly to temporary discounts offered by the government to promote domestic tourism.

“Our baseline scenario is for consumer inflation to turn positive thereafter and accelerate its pace of increase as the economy improves,” he added, shrugging off the view Japan could slip back into chronic deflation.

Japan suffered its biggest economic slump on record in the second quarter as COVID-19 hit demand, reinforcing expectations inflation will remain well below the BOJ’s 2% target for years.

Meanwhile, Japanese Prime Minister Yoshihide Suga said on Wednesday he wanted to compile a basic policy on a new digital agency by the end of this year and submit necessary bills to next year’s ordinary session of parliament.

Creating an agency to speed up the digitalisation of Japan’s outdated government administration has been a key pledge of Suga, who was elected premier last week.

While the government has made “digital transformation” its main policy plank this year, the switch has proved difficult due partly to a vertically structured bureaucracy that hampers efforts to use common platforms for administrative work.

“We need to make a digital agency as an organisation which will have a function of strong command power with personnel of high ability from public and private sectors, and lead digitalisation in the overall society,” Suga told ministers in a meeting.

“I want to accelerate discussions to do so, compile basic policy by the end of this year and submit necessary bills to next ordinary session of parliament.”

Suga said that setting up the digital agency would be a reform which would lead to a change in the nation’s economy and the society.

He pledged to make sweeping changes to overcome the digital woes, which were blamed for delaying delivery of cash payouts to help citizens weather the impact of the novel coronavirus.

The government aims to build a digital society based on “My number cards” for personal identification and improve digital administrative procedures, a government official told reporters after the meeting.

Japan’s digital transformation minister, Takuya Hirai, said in a twitter on Wednesday that he would launch a preparation team this month.

Reuters