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The Japanese Ministry of Finance has reportedly used 80 tons of gold to help fund part of its massive stimulus package to combat the coronavirus crisis. The Asian country, saddled with government debt twice the size of its economy, is under pressure to find non-tax revenues to cover rising spending on the health crisis.

The recession triggered by Covid-19 has caused Japan’s tax revenues to drop, leaving a significant hole in the budget. According to an report, before this “rare arrangement,” the Japanese Ministry of Finance would normally “tap into reserves set aside as special accounts, and return profits that the Bank of Japan (BOJ) and other agencies return to the treasury after closing their yearbooks” .

However, this year’s recession has forced the ministry to reach an arrangement involving the BOJ. The report explains how the deal was executed:

The ministry’s international affairs department sold some of the dollar reserves to the BOJ. With the yen received, the division bought gold from another division of the ministry in charge of debt management.

Meanwhile, the report cites two anonymous individuals as disclosing that “the department of the ministry in charge of debt management has generated revenue of $ 4.84 billion (500 billion yen) through the sale of gold.” The individuals add that these proceeds “will finance a new fund aimed at boosting research and development in universities.”

In the meantime, the BOJ announced on the same day that “it would buy dollars from the Department as a precautionary measure against any market disruptions caused by the pandemic.” According to the analysts interviewed, Japan may have resorted to this approach because it “wanted to avoid spending too much debt or using tax money for the fund.”

What do you think of Japan’s decision to use gold? Share your thoughts in the comments below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

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