The BOJ also announced that it would introduce a new program to support investments and loans made by FIs to tackle climate change issues.
The BOJ (Bank of Japan) has expanded its emergency financing programs for businesses within six months until the end of March 2022 following a two-day policy meeting at the end of last week.
The move came as the central bank remains on alert for a possible Covid-19 resurgence that could derail Japan’s economic recovery, especially with tens of thousands of visitors expected in Tokyo for the Olympics next month.
The expanding funding programs were first launched in March 2020 and include the BOJ’s corporate bond and commercial paper purchase programs, as well as one-year interest-free loans. offered by banks to support businesses affected by Covid-19.
These measures are intended to complement the government’s initiative to keep SMEs afloat through loans and credit guarantees. The extension of financial support is also aimed at helping companies move towards a post-Covid recovery, as the rapid roll-out of vaccinations in Japan gives hope for a return to normal economic activity.
“Financing conditions remain difficult for industries, including companies in direct contact with customers,” said BOJ Governor Haruhiko Kuroda. “We want to provide a supportive environment for businesses as they prepare to get back to normal.”
The upper limit on the amount of corporate bonds and commercial paper that the BOJ will purchase is set at JPY 20 trillion. The BOJ will also purchase ETFs and J-REITs âas neededâ with upper limits of JPY 12 trillion and JPY 180 billion, respectively.
The BOJ left its key rates unchanged, guiding short-term interest rates to minus 0.1% and long-term rates to around zero.
The BOJ also announced that it would introduce a new program to support investments and loans made by financial institutions to tackle climate change issues. An outline of the program will be published after the next political meeting on July 15-16, with a view to presenting the program this year.
Earlier this year in April, the BOJ released its biannual assessment of the stability of the Japanese financial system, in which it said that even in the event of a future resurgence of Covid-19, the Japanese financial system would likely remain very robust, as the IF did. improved their financial strength after the global financial crisis.
In March, the BOJ announced it would cut its share purchase program and in May, the central bank ignored share purchases for the first time in eight years.
Central banks around the world have started to end emergency measures while maintaining their monetary easing policies. They were to some extent encouraged by the economies that began to recover from the pandemic.
Kuroda said there was nothing strange about central banks unwinding emergency measures at different rates. “It is natural that different countries choose different monetary policy programs according to their own economic conditions,” he said.