Bank of Japan Governor Haruhiko Kuroda recently commented that the Bank is willing to extend its pandemic relief program, especially now that the number of infections is spiking and expected to affect the already fragile economic situation.

“For the time being, risks to Japan’s economic outlook are skewed to the downside,” he commented. “Taken into account the impact of the pandemic, we will consider extending further.” Kuroda was making a reference to the deadline of the pandemic relief program, which provides funding to struggling corporations.

Kuroda explained that the economy is on the path towards recovery, especially now that exports are surging. The boom in exports is due to the global economic recovery as well as rising corporate profits, which are countering the losses linked to the pronounced fall in consumption caused by the pandemic.

In the first quarter, the Japanese economy contracted by 5.1% in annual terms, while in quarterly terms, the GDP fell by 1.3%. The figures were below expectations of a 1.2% quarterly decline and a 4.6% annualized decline.

Many attribute the economic decline to the second state of emergency, which lasted from January 8 to March 21 and required people to avoid traveling across prefectures and dining in restaurants at night. Another factor is the fall in winter bonuses, which dropped by 8.5% in annual terms. Private consumption also fell significantly, dropping by 1.4% in quarterly terms, followed by government consumption, which fell significantly compared to the levels it reached by the end of last year.

Japan is currently struggling with the spread of the COVID-19 virus, which so far has infected 692,702 individuals, including 11,851 deaths. The number of cases has been spiking, which pushed the Tokyo Medical Practitioners Association to ask the government to extend the state of emergency in Tokyo and other prefectures until May 31 and to cancel the Olympic Games, which many believe could worsen the situation.

The third state of emergency officially began on April 25, caused by the spread of new COVID-19 strains that recently arrived in the country. Because of this, the experts expect an important economic contraction in the second quarter, though economists expect the GDP to expand about 1.8% in annual terms and 0.5% in quarterly terms.

By 12:34 GMT, the pound sterling fell by 0.23% against the US dollar to the 1.4156 level.