TOKYO (Reuters) – Japan must take “bold and unprecedented” steps to beat the economic fallout from the coronavirus, its economy minister said, suggesting large-scale fiscal stimulus is in the works as the government tries to fend off a recession.

Any spending package would add to support by the Bank of Japan, which is expected to ease policy next week to cushion the blow from the virus outbreak and shore up business confidence in the world’s third-largest economy.

Plunging financial markets have added to a sense of urgency for global policymakers as they ready more measures.

“The government and the central bank share a strong sense of concern” about fallout from the coronavirus, economy minister Yasutoshi Nishimura said on Friday, signaling that a mix of fiscal and monetary steps are being prepared.

“We must take bold and unprecedented steps,” Nishimura told a news conference on expected government measures to mitigate the hit to households and companies from the health crisis.

Vice finance minister for international affairs Yoshiki Takeuchi told reporters the government and the BOJ “stood ready to work as one”, as needed.

“We’ll watch market moves with a stronger sense of urgency and act accordingly based on the G7 agreement,” the country’s top currency diplomat said after a meeting with his colleagues at the BOJ and the Financial Services Agency on Friday.

The remarks came in the wake of a conference call among the Group of Seven nations, which underscored the group’s commitment to co-operate in tackling the coronavirus.

Japan is working on a new spending package of up to 20 trillion yen ($190 billion), including cash payouts to households and subsidies to tourism companies hit by a slump in overseas visitors.

RUSH TO CASH

Global stock markets crashed this week as rising infections ended a years-long bull run, with panic selling hitting almost every asset class. [MKTS/GLOB]

The rout even triggered a sell-off in near risk-free assets like Japanese government bonds (JGB), which saw prices tank as investors sold them to book profits to offset losses in stocks.

The BOJ conducted an unscheduled bond buying to stem the rise in yields, its first such action since 2018, but that did little to calm market nerves.

Finance Minister Taro Aso, however, appeared sanguine about moves in the yen, which Japanese policymakers pay very close　attention to because of worries a stronger yen will hurt exporters.

“The yen has been stable at around 105 (to the dollar) recently so there’s no need to fret about it,” Aso told reporters on Friday, describing the underlying yen trend as “stable.”

The yen tends to rise in times of financial stress as investors see the Japanese currency as a safe haven from risk.

Many market players see 100 yen to the dollar as Japanese policymakers’ line-in-the-sand.

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