* Japan must focus on protecting jobs, businesses - Nishimura
* Adds economy likely hit bottom in April through mid-May
* Govt must take timely, flexible action if needed
* Govt can handle capital injections while BOJ focus on fund needs (Adds comments on capital injection scheme in paragraph 9, economic outlook on paragraphs 11-14)
By Kaori Kaneko and Leika Kihara
TOKYO, June 8 (Reuters) - Japan should focus on back-stopping struggling businesses rather than trying to spark overall demand in fighting the coronavirus pandemic, its economy minister said, suggesting the central bank should avoid pushing interest rates deeper into negative territory.
The remark by Yasutoshi Nishimura, made in an exclusive interview with Reuters, underscores the challenge Tokyo faces in supporting an economy bracing for its worst postwar slump, while preventing a renewed spike in infections.
“What’s most important now is to protect jobs and help businesses survive the pandemic,” Nishimura said in the interview conducted on Saturday.
“We’re not at a stage yet where we want to stimulate consumption and encourage people to travel a lot. Efforts to stimulate consumption should wait a bit more,” he said.
Nishimura made the comments when asked whether the Bank of Japan should consider measures to stimulate demand, such as deepening negative interest rates.
Japan’s approach contrasts with that of Western countries that are already shifting from crisis-response to policies aimed at propping up growth.
Under Nishimura’s initiative, the government compiled two spending packages worth a combined $2.2 trillion to cushion the economic blow from the pandemic.
The BOJ joined in by easing monetary policy for two straight months in April, focusing on steps to ease corporate funding strains.
On whether the BOJ should join government efforts to inject capital into ailing companies, Nishimura said: “This is an area the government can handle. We hope the BOJ plays its part in helping financial institutions meet corporate funding strains.”
Japan slipped into recession this year and is expected to suffer an annualised 20% contraction in the current quarter, as the government’s decision to declare a state of emergency in April forced citizens to stay home and businesses to close.
Revised data released earlier on Monday showed the economy contracted less than initial estimates suggested, though the outlook remained grim due to depressed demand at home and abroad.
Indeed, while the government lifted nationwide lockdown steps last month, many analysts expect any rebound in growth to be modest.
“We’re already reopening business, so the economy will probably hit bottom from April through mid-May,” Nishimura said, voicing hope that domestic demand could pick up soon if Japan can avert a big second wave of infections.
But he warned the outlook for external demand was more uncertain as some regions in the world were still seeing infection numbers surge.
“We need to take timely, flexible action” if a global surge in infection hits Japan’s export-reliant economy, Nishimura said. “That means we shouldn’t be thinking about fiscal reform now. Tax cuts aren’t something I’m thinking about now.”
Under a policy dubbed yield curve control, the BOJ guides short-term rates at -0.1% and caps long-term borrowing costs around zero. It also buys massive amounts of assets to pump money into the economy. (Reporting by Kaori Kaneko and Leika Kihara; Additional reporting by Hiroko Hamada; Editing by Chang-Ran Kim & Shri Navaratnam)