TOKYO (REUTERS) - Japan is likely to include assistance for small businesses in an economic stimulus package it will compile after Britain's shock vote to leave the European Union, Economy Minister Nobuteru Ishihara said on Tuesday (June 28).
Japanese policymakers also said financial markets are starting to calm down after the Brexit vote last week, but repeated that they want to remain ready to respond to a further sudden jump in the yen, which could jeopardise the economy.
Mr Ishihara, speaking to reporters, did not answer questions on the size of the stimulus package or how it would be funded, but sources have told Reuters the government is willing to spend at least 10 trillion yen (S$133.2 billion) due to worries about exports, domestic demand and Japanese firms operating in Britain.
"There are concerns about lessening the impact of the British referendum on Japan's small- and medium-sized companies," Ishihara said. "Taking steps to provide liquidity to small firms could be a big factor in economic stimulus steps that we compile."
Mr Ishihara spoke after a meeting of the Council on Economic and Fiscal Policy, the government's top advisory panel.
Before Britain's referendum last week, Prime Minister Shinzo Abe had said he planned bold stimulus steps this autumn to revive his economic agenda, and now the stakes have risen.
Japan's government is on edge as Brexit initially caused declines in global stocks and pushed the yen to a 2-1/2-year high versus the dollar.
There have not been any serious signs of a liquidity crunch yet, but policymakers are closely monitoring market moves, Mr Ishihara said.
Companies asked the Bank of Japan to loan them US$1.47 billion in its regular dollar-supplying operation on Tuesday, far greater than its last such operation before Britain's vote.
While high compared with recent periods, Tuesday's amount was still less than the tens of billions of dollars that the BOJ supplied in operations after the collapse of Lehman Brothers in 2008.
A rising yen threatens Japan's economy because it weighs on exporters earnings and increases deflationary pressure by lowering import prices.
"Extremely nervous moves are seen in the forex market," Japan's top government spokesman Yoshihide Suga said. "So that such moves do not continue, we will closely watch markets with a sense of urgency and even more attention than before, and will respond firmly as needed."
Sterling has suffered a much more brutal sell-off, tumbling to the lowest in more than 30 years versus the dollar. Uncertainty about the economic relationship between Britain and the EU, combined with confusion over who will replace outgoing British Prime Minister David Cameron could further test the Group of Seven's crisis response mechanism.
"Before G7 held an emergency conference call, each country had little idea about how much foreign reserves the Bank of England has to support the pound and we thought we might need to jointly support it in case of selling," Japanese Finance Minister Taro Aso said. "In fact, Britain did not ask for joint intervention to support the British pound."