Makoto Sakurai: Economic activity, prices, and monetary policy in Japan

Speech (via webcast) by Mr Makoto Sakurai, Member of the Policy Board of the Bank of Japan, at a meeting with business leaders, Fukui, 21 October 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

I. Economic Activity at Home and Abroad

A. Recent Developments in Overseas Economies

I would first like to talk about developments in overseas economies, given the significant contraction in global economic activity caused by the worldwide spread of the novel coronavirus (COVID-19).

The global economy grew at a rate of around 3-4 percent up through 2019 but faced the outbreak of COVID-19 at the turn of 2020. The impact of COVID-19 spread rapidly from China to other Asian countries including Japan, as well as Europe, the United States, and more or less the rest of the world in a short period of time. Economic globalization over the past four decades has been accompanied by a massive increase in the movement of people across countries. Partly as a result of this, the current pandemic has spread more rapidly and has had a greater impact on the global economy than pandemics in the past. Global economic activity and global trade both remain at low levels as measures to restrict economic activity, including temporary lockdowns of cities, continue to be implemented, albeit to varying degrees (Chart 1). According to the October 2020 World Economic Outlook released by the International Monetary Fund, the global growth rate for 2020 is projected to be minus 4.4 percent. By region, negative growth figures are large for advanced economies but relatively small for emerging economies; this mainly reflects the fact that COVID-19 has already begun to subside in China, which experienced the earliest outbreak. However, given the resurgence of infections in advanced economies and the further spread of COVID-19 in emerging economies, uncertainty regarding the outlook for infections is extremely high, and it is therefore necessary to be vigilant about the possibility of a further global economic downturn.