A clothing shop at Ginza district in Tokyo . Companies asked the Bank of Japan to loan them $1.47b on Tuesday. Image Credit: AP

TOKYO: 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.

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 any further sudden jump in the yen, which could jeopardise the struggling economy.

Ishihara, did not answer reporters’ questions on the size of the stimulus plan, but sources have told Reuters the government is willing to spend at least 10 trillion yen ($98.00 billion).

“There are concerns about lessening the impact of the British referendum on Japan’s small- and medium-sized companies,” Ishihara said after a meeting of the Council on Economic and Fiscal Policy, the government’s top advisory panel.

“Taking steps to provide liquidity to small firms could be a big factor in economic stimulus steps that we compile.” 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.

Brexit has sparked turmoil in global markets and pushed the yen to a 2-1/2-year high versus the dollar, which threatens to erode exporters’ earnings.

Japan should not give up the right to currency intervention to protect its economy, even if the United States or other countries would disapprove, Koichi Hamada, an adviser to Abe and an emeritus professor at Yale University, told Reuters.

There have not been any serious signs of a liquidity crunch yet, but policymakers are closely watching, Ishihara said.

Companies asked the Bank of Japan to loan them $1.47 billion in its regular dollar-supplying operation on Tuesday. That was far greater than its last operation before Britain’s vote, but still less than the tens of billions of dollars the BOJ supplied in operations after the 2008 collapse of Lehman Brothers.

EXPORTERS VULNERABLE Major exporters such as Mazda Motor Corp and Canon Inc often have operations overseas and have learnt over the years to manage risk through currency hedging and inventory control. But many smaller suppliers which lack the means to buffer exchange rate swings can be more vulnerable.

“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.” 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 pound.”