Japanese Prime Minister Shinzo Abe pledged on Friday to take policy steps as needed to prevent the coronavirus outbreak from dealing a severe blow to the country's fragile economic recovery.
Abe said the government still had sufficient reserves to tap for emergency spending related to the coronavirus epidemic, signaling that he saw no immediate need to compile a fresh spending package.
"But I'm aware of views that if the virus spreads, it could have a huge impact on the economy," Abe told parliament. "We're therefore watching developments carefully."
"If developments change, we'll ensure to take steps as needed to prevent the virus from becoming a huge downside risk to Japan's economy," he said.
Japan's economy shrank at its fastest pace in nearly six years in the December quarter, as soft global demand and last year's sales tax hike hurt consumption and business spending.
Some analysts expect the economy to shrink again in the current quarter and slip into recession - defined as two straight quarters of contraction - as the virus disrupts supply chains, triggers cancellation of events and keep shoppers home.
"It's true Japan's economy is in a pretty tough condition," due to cancellations of various events," economy minister Yasutoshi Nishimura told parliament on Friday. "But the priority now is to prevent the virus from spreading."
Japan's government compiled a fiscal spending package late last year to counter the hit to exports from soft global demand. But some ruling party lawmakers are beginning to call for fresh spending given the damage from the epidemic.
The Bank of Japan is wary of topping up an already massive stimulus program given the rising cost of prolonged monetary easing.
Goushi Kataoka, one of the most dovish members of the BOJ's nine-member board, said he saw no immediate need to loosen policy further.