GorricetaLaw named innovative tech law firm of the year

November 26, 2019 | 11:37 am

Last week, legal services firm Gorriceta Africa Cauton & Saavedra () was named both innovative tech law firm of the year and tech, media, telco law firm of the year at the Philippine Law Awards 2019.

“Thank you to Asian Legal Business, Thomson Reuters and to our peers, colleagues, clients for recognizing our work in this space,” said Atty. Mark S. Gorriceta, managing partner at GorricetaLaw, in a LinkedIn following the event. Mark has been a prominent voice in the startup community, perhaps most widely known as the mentor specializing in legal affairs on the latest season of CNN’s The Final Pitch.

Over the past three years, GorricetaLaw has established itself as a leading firm in navigating the legal frontiers of emerging technologies like fintech, artificial intelligence, and blockchain. In the fields of tech, media, and telecommunications, the firm represents clients including Xurpas, Zalora, Rappler, and Coins.ph.

“Grateful to our team for putting in all the hard work day-in and day-out in this complex practice of law,” he said. “Proud and humbled to be number one in the Tech, Fintech, Innovations, TMT space in the Philippines. Inspired to do more and be better.”

National government fiscal performance (October 2019)

November 26, 2019 | 12:33 am

STATE SPENDING increased for the fourth straight month in October, though by the smallest increment in that period, yielding a smaller budget deficit as revenue collections grew at a faster clip, the Bureau of the Treasury (BTr) reported on Monday. Read the full story.

State spending growth slows in October

November 26, 2019 | 12:33 am

By Beatrice M. Laforga

STATE SPENDING increased for the fourth straight month in October, though by the smallest increment in that period, yielding a smaller budget deficit as revenue collections grew at a faster clip, the Bureau of the Treasury (BTr) reported on Monday.

The government posted a narrower P49.3-billion budget deficit for the month, contracting by 17.71% year on year and also a reversal from the 85.52% hike in September as revenue generation outpaced state spending.

That brought the year-to-date deficit to P348.3 billion, a fifth smaller than the P438.1-billion gap recorded in last year’s comparable 10 months.

EXPENDITURES
As the national government pressed on with efforts to catch up with its spending program that was crimped by late enactment of the national budget and a ban on new public works 45 days ahead of the May 13 midterm elections, expenditures edged up 1.37% to P310.8 billion in October from P306.6 billion a year ago.

The Treasury attributed the small increment to a high base the past year.

Primary expenditures, which count spending on infrastructure and other capital outlays but exclude interest payments, went up by 2.65% to P290.1 billion from P282.6 billion, while interest payments dropped 13.7% to P20.7 billion from P24 billion.

With NG expenditures so far dropping in three months — in March (eight percent), April (15.1%) and June (0.99%) — spending increased by 5.05% to P2.938 trillion in the 10 months to October from P2.796 trillion a year ago.

Primary expenditures similarly grew by 4.89% to P2.623 trillion from P2.501 trillion, while interest payments rose by 6.47% to P314.5 billion from P295.3 billion.

REVENUES
The government’s overall revenue collections grew 5.99% to P261.6 billion in October from P246.8 billion a year ago.

Tax collections accounted for 90.79% of the total at P237.5 billion, 6.78% more than the year-ago P222.4 billion.

The Bureau of Internal Revenue (BIR) contributed nearly three-fourths of tax collections and 68.08% of total revenues with P178.1 billion, 8.09% more than the year-ago P164.8 billion.

The Bureau of Customs accounted for 22.05% of total revenues and 24.29% of tax take with P57.7 billion, 3.04% more than the year-ago P56 billion.

Tax collections from other offices went up 3.38% to P1.7 billion from P1.6 billion.

Non-tax revenues — mainly subsidies to cover taxes on government transactions — dipped 1.2% to P24.1 billion from P24.4 billion. The Treasury contributed P10.6 billion, up 26.77% from P8.4 billion a year ago, “fuelled by higher income from NG deposits, NG share from PAGCOR income and dividends on NG shares of stocks,” a press release explained, referring to the Philippine Amusement and Gaming Corp. Other offices, however, saw their non-tax collections slide 15.82% to P13.5 billion from P16 billion.

The 10 months to October saw overall revenues grow 9.8% to P2.59 trillion from P2.358 trillion a year ago.

Tax revenues increased by 9.93% to P2.328 trillion from P2.118 trillion as BIR collections rose 10.68% to P1.781 trillion from P1.609 trillion, while Customs collected 7.57% more at P527.7 billion from P490.6 billion. Tax revenues from other offices inched up 7.05% to P19.4 billion.

Non-tax revenues during the period increased 8.68% to P261.5 billion from P240.6 billion, as the Treasury collected 30.69% more at P129.2 billion from P98.9 billion while other offices got 6.68% less at P132.3 billion.

STRAIN IN CATCH-UP EFFORTS
In a note sent to journalists, Security Bank Corp. Chief Economist Robert Dan J. Roces said October’s narrower fiscal deficit bared “the strain faced by the catch-up spending plan for the remainder of the year.”

Mr. Roces said the government may not reach its budget deficit target for the year which is capped at P624.4 billion or equivalent to 3.2% of gross domestic product (GDP).

“Government spending will carry a heavier burden in nudging growth for the rest of the year as the positive effects of the fiscal stimulus pitches and the lag upshot from monetary easing have yet to be felt,” Mr. Roces said.

For ING Bank NV Manila Branch senior economist Nicholas Antonio T. Mapa, the “government carried on its catch-up spending with expenditures up 1.4%, managing to still expand on top of the 35.2% surge in state spending last October 2018.”

“State spending coupled with revived capital formation (after BSP rate cuts) and robust consumption (low inflation and SEA games) will likely be enough to get the Philippine economy past the six percent finish line as we flip the calendar to 2020,” Mr. Mapa said, referring to the lower end of the government’s 6-7% GDP growth target for this year.

Treasury launches ‘Premyo’ bonds

November 26, 2019 | 12:32 am

THE BUREAU of the Treasury on Monday launched its one-year peso-denominated “Premyo bonds para sa bayan” (Premyo bonds) as part of its bid to lure more small investors to government securities.

Here, four players can each win up to P1 million in cash or non-cash prizes such as real estate for as low as P500 in investment.

During the bond’s launch yesterday at the Development Bank of the Philippines (DBP), National Treasurer Rosalia V. De Leon announced that three property developers — DoubleDragon Properties Corp., Vista Land and Landscapes, Inc. as well as Megaworld Corp. — have partnered with the government to offer grand prizes during quarterly draws.

Ms. De Leon said the Premyo bonds are designed to encourage Filipinos to save while contributing to nation building, by reducing the minimum investment “to just P500” from the usual floor of P5,000. The Treasury also made it more convenient to invest by providing the option of applying online. Investors can also acquire the bonds through authorized selling agents.

“Premyo Bond, in small ways hopefully, could demonstrate that, if done right, digitalization of finance offers a gateway to achieve significant inroads towards financial inclusion and payments efficiency,” she said in a speech.

In a disclosure yesterday, Doubledragon said one winner will win a P6-million unit at Hotel 101 Fort in Bonifacio Global City in Taguig City in one of the four draws.

“The Premyo Bonds are a great way to incentivize first-time retail bond investors to try out investment instruments like this as a way for them to optimize and diversify their savings. It is also a great way to support our country and help spur inclusive growth,” DoubleDragon Chairman Edgar J. “Injap” Sia II said in the disclosure.

Under its cash reward tier, a total of P3 million will be raffled off during the quarterly draws where one winner will win P1 million, 10 winners to win P100,000 while 50 winners can win P20,000.

“On every cash rewards draw date, each Premyo Bonds unit shall be assigned a 20-character electronic Rewards Number (“e-RN”) using the Cash Rewards application system,” the Treasury said in a notice.

It added that “a bondholder in possession of multiple Premyo Bonds units may win multiple times.”

In a Nov. 22 notice, the Treasury said that the bonds will be in “scripless form” and will have a minimum required investment of P500 and integral multiples of P500 thereafter. The issue has an initial size of P3 billion but the Treasury has the option to upsize.

“The Bureau of the Treasury has the option to upsize, but our target right now is P3 billion and we can still continue the offering and get a higher volume,” Ms. De Leon said during Monday’s launch.

The debt papers carry an interest rate of three percent per annum to be paid quarterly and subject to a 20% final tax.

While there will be no maximum investment, a bondholder can have a maximum of 20,000 Premyo bond units worth P10 million per selling agent to qualify for the rewards scheme.

Eligible investors for the bond issuance includes individuals who have a local bank account, cooperatives, qualified associations such as nonstock and loans associations as well as trust entities, among others.

The bond offer period runs from Nov. 25 to Dec. 13.

“When subscription has reached a level deemed sufficient by the BTr, the BTr shall announce the termination and closure of the offer period through the BTr Web site or in any electronic financial information providers chosen by the BTr,” it said.

Selling agents for the transactions are BDO Unibank, Inc.; BDO Capital and Investment Corp.; Chinabank Corp.; China Bank Capital Corp.; Development Bank of the Philippines; First Metro Investment Corp.; Land Bank of the Philippines and Metropolitan Bank & Trust Co. — Beatrice M. Laforga

Philippines first in Asia for World Bank’s catastrophe-linked bonds

November 26, 2019 | 12:31 am

THE WORLD BANK has issued three-year catastrophe-linked bonds (CAT) on behalf of the Philippines that could amount to $225 million worth of financial protection against earthquakes and tropical cyclones, the multilateral lender said in a statement on Monday.

The World Bank said the CAT securities consisted of two tranches, $75 million for losses from earthquakes and $150 million for losses from tropical cyclones.

The papers were issued under the International Bank for Reconstruction and Development’s (IBRD) capital-at-risk notes program that is designed to transfer risks related to natural disasters to capital markets, the lender said.

World Bank Vice-President and Treasurer Jingdong Hua said in the same statement that the CAT bonds for the Philippines were the “first to be sponsored by the government of an Asian country,” noting that “[m]any countries in Asia are highly vulnerable to natural disasters, which makes finding innovative, capital markets solutions a major priority to address the impact on their economies.”

The World Bank explained that an earthquake or a tropical cyclone will have to meet criteria set under bond terms to trigger payouts.

The two tranches had a settlement date of Nov. 22 and maturity date of Dec. 2, 2022. Coupon will be paid monthly. The bond coupon per annum is determined based on the “three-month USD Libor plus a (-0.12% per annum) funding margin plus the risk margin (subject to a minimum rate of interest equal to the risk margin)”.

National Treasurer Rosalia V. De Leon said in the same statement that the CAT bonds are a “vital building block” for the country’s long-term disaster risk and insurance strategy that the government has been developing since 2009.

“This instrument addresses the financing gap for immediate post-disaster needs for extremely high-risk events. It complements the government’s existing disaster risk financing mechanisms designed to ensure comprehensive financial protection for the Philippines,” Ms. De Leon explained.

Mara K. Warwick, World Bank country director for Brunei, Malaysia, Philippines and Thailand, said in the statement that “these CAT bonds allow the Philippines to transfer natural disaster risks to the capital markets while enabling the authorities to respond quickly to the needs of citizens when calamities strike.”

GC Securities, a division of MMC Securities LLC, and Swiss Re were the joint structuring agents, joint bookrunners and joint managers for the transaction while Munich Re served as the joint structuring agent, placement agent and joint manager. AIR Worldwide acted as the risk modeler and calculation agent. — B. M. Laforga

Rate cut next month ‘possible’ — BSP chief

November 26, 2019 | 12:30 am

MONETARY AUTHORITIES could still slash benchmark interest rates anew in their eighth and last policy review for the year on Dec. 12, provided conditions warrant further easing this soon beyond the 75-basis-point total cut so far, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Monday.

“The BSP will always be data-dependent so we will evaluate… every time we have a policy meeting,” he told reporters on the sidelines of the Financial Education Stakeholders Expo at SMX Convention Center in Pasay City.

A Nov. 18 S&P Global Ratings’ report said it expected a 25-bp cut towards yearend, but the Philippine section of the report may have been written before the BSP reduced banks’ reserve requirement ratio (RRR) a fourth time, totaling 400 bps for the year, on Oct. 24 since it referred to a 300- bp cumulative RRR cut.

Monetary authorities stayed monetary policy settings during their Nov. 14 review.

Asked on S&P’s rate cut expectation, Mr. Diokno said. “Pwede ‘yun, pwede ‘yun (It is possible).

Benchmark policy rates now stand at 3.5% for overnight deposit, four percent for overnight reverse repurchase and 4.5% for overnight lending.

After this year’s 400 bp reduction, the RRR starting next month will be 14% for universal and commercial lenders as well as non-bank financial institutions with quasi-banking functions, and four percent for thrift banks, while the requirement for rural banks will remain at three percent.

At the same time, Mr. Diokno said monetary authorities will avoid “drastic” policy adjustments since they do not want to be misinterpreted by the market as being “desperate”.

“Usually if you’re doing some reform, dapat siguro (maybe it should be) gradual so you can monitor ‘yung development… Kasi minsan, ‘pag drastic baka disruptive (Because sometimes, if it’s drastic, it could be disruptive),” he said.

“It [could also be] misinterpreted na desperado ka (that you are desperate). We’re not desperate. In fact ‘yung policy natin ngayon (our policy right now) is appropriate for where we want to be.”

He had also said late last week that monetary authorities would want to watch previous policy moves take root in the market, since it takes up to nine months for the impact to be evident.

The central bank is set to release domestic liquidity data as of October as well as outstanding loans disbursed by big banks on Friday.

Latest data from the BSP showed that domestic liquidity expanded by 7.7% year on year in September to P12 trillion from a 6.3% growth in August. Meanwhile, loans disbursed by universal and commercial banks kept a 10.5% expansion pace in September from August. — Luz Wendy T. Noble

Taylor Swift puts rancor aside, smashes all-time AMA record

November 26, 2019 | 12:07 am

TAYLOR SWIFT took the high road as she won six American Music Awards on Sunday to surpass Michael Jackson’s all-time record, avoiding any direct mention of a bitter dispute with her old record company.

Swift won the top award, artist of the year, and four others. She was also given an honorary artist of the decade award, taking her all-time total to 29 American Music Awards (AMA), organizers said. That easily outstripped the 24 awards picked up by Jackson.

“All that matters to me is the memories that I have had with you guys, with you the fans, over the years,” Swift, 29, told the audience at the ceremony in Los Angeles after performing a medley of her old hits.

Swift had been expected to speak out about a long feud with record industry executive Scooter Braun, who owns the master recordings to her first six albums after Swift signed with a new label in 2018.

Swift accused Braun last week of refusing permission for her to sing songs from her back catalog at the awards show. The public spat culminated last week with Braun saying that his family had received numerous death threats after the pop singer urged her 122 million Instagram fans to let Braun “know how you feel about this.”

But on Sunday, the “Fearless” singer made no mention of the dispute, although she opened her performance wearing a white shirt printed with the titles of her old albums.

“This year for me has been a lot. It’s been a lot of good, it’s been a lot of really complicated,” she said, without elaborating. She beat Drake, Ariana Grande, Halsey and Post Malone as artist of the year.

Newcomer Billie Eilish, 17, took home two statuettes for best new artist and best alternative rock artist after a breakout year that saw her top the US charts with her single “Bad Girl.”

“You made it all happen,” said Eilish, thanking her fans.

Eilish showed her support for environmental causes by wearing a T-shirt with the slogan “No Music on a Dead Planet” as she gave her first awards show performance with “All the Good Girls Go to Hell.”

Selena Gomez kicked off the ceremony in her first live TV performance in two years after undergoing a kidney transplant in 2017 and battling anxiety and depression.

Body positive R&B singer Lizzo performed her new single “Jerome,” and Cuban-born Camila Cabello and boyfriend Shawn Mendes sang their hit pop single “Señorita,” which won the award for collaboration of the year.

British rocker Ozzy Osbourne, 70, who has been sidelined by serious health problems for a year, was mostly seated as he took to the stage with rappers Post Malone, Travis Scott, and rocker WATT for their single “Take What You Want.”

Punk rockers Green Day got the audience to its feet as they marked the 25^th anniversary of their 1994 breakout album Dookie.

Other performers included the Jonas Brothers, Kesha, Halsey, Christina Aguilera and Shania Twain. — Reuters

BPI Family Savings eyes P2B from bonds

November 26, 2019 | 12:06 am

BPI Family Savings Bank (BFSB) has begun its maiden bond offering, from which it targets to raise at least P2 billion.

In a statement on Monday, the thrift bank said the bond issue will comprise the first tranche of its P35-billion bond program approved by its board of directors on Oct. 31.

The bonds have a tenor of two-and-a-half years and carry an interest rate of 4.3% per annum, which will be paid quarterly.

“The minimum investment amount is set at P100,000.00 with increments of P50,000.00 thereafter,” the bank said in a statement.

The offer period, which started yesterday, is set to run until Dec. 6. Meanwhile, the issue and listing date is targeted by Dec. 16.

BFSB’s parent bank Bank of the Philippine Islands (BPI) said the proceeds from the bond offer will be used to “support its investor base, fund its asset expansion, particularly loan growth, digitalization initiatives, and general corporate purposes.”

BPI Capital Corp. is the sole selling agent for the issue, while The Hongkong and Shanghai Banking Corp. is the sole arranger and participating agent.

BPI’s net income jumped 38.6% year on year to P8.29 billion in the third quarter, bringing its bottom line from January to September to P22.03 billion, up 29.5% from the same period last year.

The listed lender’s shares closed at P90 apiece on Monday, down by 0.44% from its previous finish. — L.W.T. Noble

Key winners at the 2019 American Music Awards

November 26, 2019 | 12:06 am

THE 2019 American Music Awards, voted for by fans, took place in Los Angeles on Sunday.

Following is a list of winners in key categories:

• Artist of the year — Taylor Swift

• Artist of the decade — Taylor Swift

• New artist of the year — Billie Eilish

• Collaboration of the year — Shawn Mendes and Camila Cabello “Señorita”

• Tour of the year — BTS

• Favorite music video —

Taylor Swift “You Need to Calm Down”

• Favorite social artist — BTS

• Favorite male artist pop/rock — Khalid

• Favorite female artist pop/rock — Taylor Swift

• Favorite duo or group pop/rock — BTS

• Favorite album pop/rock — Taylor Swift, Lover

• Favorite male artist country — Kane Brown

• Favorite female artist country — Carrie Underwood

• Favorite duo or group country — Dan + Shay

• Favorite artist rap/hip-hop — Cardi B

• Favorite male artist soul/R&B — Bruno Mars

• Favorite female artist soul/R&B — Beyoncé

— Reuters

PSEi to hit 9000 level in 2020

November 26, 2019 | 12:06 am

THE Philippine Stock Exchange index is seen to bounce back in 2020. — *SANTIAGO ARNAIZ*

By Denise A. Valdez, Reporter

BPI Securities Corp. is projecting the Philippine Stock Exchange index (PSEi) to reach 9,000 in 2020, driven by the faster growth of the economy, particularly the banking, property and consumer sectors.

In a statement yesterday, the brokerage arm of Ayala-led Bank of the Philippine Islands (BPI) said earnings growth of the PSEi in 2020 is expected to match this year’s 12%.

“We are currently trading at around 16 times forward earnings, near the market’s 10-year average. Amidst strong earnings and macro growth, the backdrop for 2020 appears more attractive than the present year and we think the PSEi can trade around 18 times, translating to an index target of 9,000 for 2020,” BPI Securities President and Chief Executive Officer Hermenegildo Z. Narvaez was quoted in the statement as saying.

Speaking to reporters at a briefing in Makati City, Mr. Narvaez said BPI Securities’ optimistic outlook is based on expectations of faster economic growth.

“The only problem this year is the budget was not passed on-time. If you look at all the other data, if you look at private consumption, the trade gap was fairly narrow. So assuming government spending is as strong as expected, even if it is slightly below our expectations, I think we’re quite optimistic that 6% growth is quite possible,” he said.

He was referring to the government’s target of hitting a gross domestic product (GDP) growth of 6-7% for 2019.

Mr. Narvaez also said he believes there will be no recession in the United States and the European Union — which is one of the factors driving some investors away from the stock market.

“I think there’s a lot being written about the global economy, especially with regard to the trade war, how that’s going to impact economies… We don’t think there’s going to be a recession in the US and Europe,” he said.

While Mr. Narvaez said the US-China trade war may not likely affect the Philippine economy, he noted it remains a risk to Philippine stocks as it affects investor sentiment.

“Trade war impacts sentiment, which is really getting crucial for our market… (But) in terms of the economy, obviously we’re shielded from that. We don’t have an export-oriented growth model, it’s more driven by consumption. So it’s really more external,” he said.

Despite the rosy outlook, Mr. Narvaez said the market may still be volatile in 2020 until the US-China trade war settles down.

For the end of 2019, he said the main index may still reach the 8,150 level with support at 7,600.

“We think the market potentially will bottom out maybe 7,600… Optimistically though, I think 8,150 is possible, assuming there’s a rally sometime in the last month of the year,” Mr. Narvaez said.

The PSEi closed on Monday at 7,771.62, down 52.97 points or 0.68% from previous trading.

CPG’s Azure makes beach resort experience in the city possible

November 26, 2019 | 12:06 am

By Cathy Rose A. Garcia
Associate Editor

WHEN Century Properties Group, Inc. (CPG) launched Azure Urban Resort Residences in 2010, not a few scoffed at its plan to create a man-made beach in the middle of Bicutan in Parañaque.

Nine years later, CPG has now completed Azure’s nine residential towers, alongside the man-made beach, a wave pool, beach club, a lap pool and other amenities.

Azure is a joint venture between CPG unit Century Limitless Corp. and Columbian Autocar Corp., which owned the six-hectare land.

“When it was offered to us by Columbian, (the lot) was nice and contiguous but it was in Bicutan…That’s why we had to come up with the insane idea of making a beach and all these resort amenities to make Bicutan a destination,” CPG Vice Chairman John Victor R. Antonio told reporters on Nov. 16 after a ceremony marking the completion of Azure.

With the “beach-within-the-city” concept, Mr. Antonio said the company was betting on Filipinos’ love of beaches.

“We thought what do Filipinos love most? And what can’t they find in an urban setting? The beach… But there’s no beach in the city. So this was a crazy idea of mine, why don’t we create a beach? Because to create a building is easy but to create something that would last for generations and our buyers would be proud of would be difficult,” he said.

Azure is composed of nine 20-storey towers all named after famous beach destinations — Rio, Santorini, St. Tropex, Positano, Miami, Maui, Maldives, Bahamas and Boracay. The towers have a combined 5,355 units with a total sales value of P22.55 billion.

Around 98% of the inventory has been sold out.

For the towers, CPG offered one-bedroom (30 square meters), two-bedroom (45 sq.m.) and penthouse (50 sq.m.) units.

“We starting at P90,000 to P95,000 per sq.m., and it went up to P180,000 per sq.m.,” Mr. Antonio said.

The CPG vice chairman noted they originally offered more two-bedroom units in the first few towers, but later towers focused more on one-bedroom units due to market demand.

“They want champagne taste on a beer budget. They want the amenities and the lifestyle, but on a budget,” Mr. Antonio said.

With the man-made beach and wave pool, Azure has become a tourist destination, especially among staycationers.

Owners have started renting out their units on Airbnb or through CPG’s own Siglo Suites. This allows the owners, most of them who live abroad, to generate revenues from their units. Around 100 Azure units can currently be rented directly through Siglo Suites.

The rise in short-term rentals caused overcrowding in the beach and wave pool, leading the company to implement measures to control the number of users allowed per unit.

“It gets full during the summer. We had to implement a system because people were bringing in their families, so there was overcrowding. We created a system together with the unit owners and they respected the plan,” Mr. Antonio said.

Most amenities are exclusive to unit owners. The Paris Beach Club, designed by socialite Paris Hilton, features the gym, locker rooms, residents’ lounge, playroom, movie room, dance studio, game room, function rooms, spa and café.

Outdoor amenities also include two lagoon pools, lap pool, children’s water play area, beach volleyball area, basketball court and pocket gardens.

Mr. Antonio said the success of Azure has prompted CPG to replicate it in San Fernando, Pampanga. Azure North features three residential towers, along with a beach lagoon and wave pool.

“We will be completing the first two towers and amenities next year. There was a lot of demand, so why not create it for the north? Azure North had brisk sales because they didn’t have a masterplanned beach community in Pampanga,” he said.

IMF urges BoJ to target shorter maturity yields to ease strain

November 26, 2019 | 12:05 am

THE BANK of Japan should consider steps to ease the strains caused by its policy on the banking sector, the International Monetary Fund said. — *REUTERS*

TOKYO — The International Monetary Fund (IMF) urged the Bank of Japan (BoJ) to consider steps to ease the strains caused by its ultra-loose policy on financial institutions, such as targeting a shorter maturity for its long-term bond yield target.

Fiscal policy can complement the BoJ’s efforts to protect the economy from overseas risks, the global lender said, suggesting that Tokyo should not shy away from ramping up fiscal spending in the near term despite its huge public debt.

“Strengthening the effectiveness of coordination between monetary and fiscal policy remains a high priority,” the IMF said in its Article 4 policy proposal to Japan on Monday.

While the central bank ought to maintain its massive stimulus program, it must also find ways to mitigate the rising cost of prolonged easing and make its policy sustainable as inflation remains distant from its 2% target, the IMF said.

“As it stands, both fiscal policy and monetary policy are stretched, leaving limited room to respond to shocks,” IMF Managing Director Kristalina Georgieva told a news conference.

“The BoJ’s accommodative stance needs to continue to support reflation and growth. At the same time, financial sector oversight should be strengthened to mitigate rising financial stability risks,” she said after the Article 4 consultations.

Under a policy dubbed yield curve control (YCC), the BoJ pledges to guide short-term rates at -0.1% and the 10-year bond yield around 0%. While the policy has helped keep corporate borrowing costs low, it has flattened the yield curve and crushed the margin commercial banks earn from lending.

One way to ease the impact on financial institutions could be to steepen the yield curve by shifting the BoJ’s 0% target for the 10-year yield to a shorter maturity, the IMF said.

BoJ Governor Haruhiko Kuroda has repeatedly said if the central bank were to ease, it would seek to do so without causing an excessive fall in super-long yields. He believes that one way to keep long-term yields from falling too much could be for the government to issue more super-long bonds.

The BoJ could also make its 2% inflation target a more flexible, long-term goal by adopting a target range for price moves, as structural factors like technological innovation may keep inflation low for a prolonged period, it said.

Years of massive monetary stimulus has failed to fire up inflation to the central bank’s target, while diminishing policy ammunition and global growth risks have cast further doubt on its ability to reach its goal.

The Financial Services Agency, Japan’s banking regulator, should strength financial sector supervision and prod regional banks to diversify its business operations, the IMF said.

“Rising economic policy uncertainty, an increase in financial stability risks, and consumer and investor confidence at multi-year lows all suggest a rising risk profile” for Japan, it said.

Japan’s economic growth slumped to its weakest in a year in the third quarter as soft global demand knocked exports. Analysts fret that a sales tax hike from October could also weigh on the economy. — Reuters