TOKYO (Reuters) – Japanese Prime Minister Shinzo Abe said the government will work closely with the Bank of Japan to stabilise markets, piling pressure on the central bank to ramp up stimulus next week to fend off risks to the economy from the coronavirus outbreak.

The remarks came hours after BOJ Governor Haruhiko Kuroda reiterated the central bank’s readiness to act against “very unstable” markets, suggesting a heightening chance of additional monetary easing at next week’s rate review.

“Markets are making nervous movements amid uncertainty over the global economic outlook. Based on agreements made among G7 and G20 nations, the government will work closely with the BOJ and authorities of other countries to respond appropriately,” Abe said in a meeting with ruling party executives on Tuesday.

Asian shares bounced and bond yields rose from historic lows on Tuesday as speculation of coordinated stimulus from global central banks and governments calmed panic selling.

The market volatility and the widening hit to the economy from the coronavirus epidemic are adding pressure on the BOJ to ramp up stimulus at its March 18-19 policy meeting.

“There’s uncertainty on when the coronavirus will be contained, and markets are making very unstable moves,” Kuroda told parliament on Tuesday.

“We’ll continue to keep an eye out on how the spread of the virus could affect Japan’s economy and prices, particularly via domestic and overseas market developments, and act appropriately as needed without hesitation,” he said.

As the health crisis stoke fears of a global recession, G20 finance ministers and central bank governors pledged on Friday to take “appropriate” fiscal and monetary steps to protect the economy from shocks.

BOJ EYES MORE ETF BUYING

Under a policy dubbed yield curve control, the BOJ guides short-term interest rates at -0.1% and the 10-year government bond yield at around zero. It also buys risky assets such as exchange-traded funds (ETF) to funnel money to the economy.

Markets are rife with speculation the BOJ could pledge next week to buy ETFs at a faster pace than the current commitment to do so by roughly 6 trillion yen ($58.12 billion) per year.

Sources familiar with the BOJ’s thinking say such a step is among options the central bank may consider if it approaches the ceiling as a result of aggressive purchases.

Kuroda told parliament the BOJ had bought a cumulative 2.04 trillion yen worth of ETFs since October last year.

He also revealed the BOJ’s own estimate showed its holdings of ETFs may incur paper losses once Tokyo’s Nikkei stock average falls below 19,500. The Nikkei .N225 stood around 19,665 on Tuesday after briefly slipping below 19,000 in morning trade.

The remarks underscore the cost the BOJ incurs by loading up on ETFs, which does not have maturity and thus won’t fall off the central bank’s balance sheet unless it sells them.

In a bid to soothe market jitters, the BOJ issued an emergency statement on March 2 pledging to offer ample liquidity via market operations and asset buying.

Since then, the BOJ has been accelerating the pace of ETF buying. It bought 100.2 billion yen ($979 million) on Monday, matching a record pace of purchases made twice last week.

Before the emergency statement was issued, the BOJ would typically buy about 70 billion yen per day whenever it stepped into the market.

Eiji Maeda, the BOJ’s executive director, said the central bank was scrutinising daily price moves and taking appropriate action to stabilise markets.

“We of course won’t hesitate to take additional measures if needed, depending on future market developments,” he said.

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