Back to ListThe spread of the novel coronavirus (COVID-19) is shaking global financial markets. Restrictions on outings and travels were set worldwide to prevent infection, and economic activities were suddenly suspended. Central banks in each country and region are rushing to lower policy interest rates and expand quantitative easing to mitigate the sharp downward pressure on the economy. The Bank of Japan also decided on an additional easing for the first time in three years on March 16, and the U.S. Federal Reserve has finally decided on unlimited quantitative easing. The rise in the demand for dollar funds is seen not just in the US, but globally. In Japan, it is likely that not only small and micro enterprises and individuals but also large companies will need to consider their cash flow.
Financial Research Reoccurrence of the financial shock （No. 42）
Novel Coronavirus Increases Financial Market Stress
― Redefinition of the financial industry through digitalization and financial market reform
The environment surrounding banks is becoming more severe due to the declining population and a prolonged low interest rate environment. Regional banks aim to earn profits through cross-border lending and the consolidation of branches, but the rapid growth of new-type banks with information and communication technology (ICT) is already on par with regional banks. The environment surrounding the domestic and foreign financial markets has changed significantly with discussions on the digital currency issuance of Libra and the Central Bank, a review of the Tokyo Stock Exchange listing standards and market reforms aimed at shifting to the new stock price index, and the abolition of the global interest rate index LIBOR. It has become necessary to redefine the financial industry.
If the YCC is Lifted, Long-term Interest Rates could Rise to 0.8–1.1%; Aftermath for Businesses and Public Finances
Need to revise YCC, but burden on households and banks could increase
1% increase in adjustable mortgage rates increases early repayment probability by 25%
Investment in CO2 capture technology is key to achieving a decarbonized society
The Actual State of Branch Consolidation in Japanese Banks
Estimating the impact of the Fed’s monetary policy normalization on long-term U.S. interest rates and the beggar-thyself policy effect on Japan if the BOJ maintains easing policy