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188584
Tue, 06/14/2011 - 19:09
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https://oananews.org//node/188584
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BOJ decides on extra 500 bil. yen policy easing to boost economy
TOKYO (Kyodo) - The Bank of Japan on Tuesday stepped up its efforts to boost the country's economy, which has been flagging since the earthquake and tsunami in March, introducing a 500 billion yen ($6.2 billion) cheap loan program to support smaller companies with growth potential.
The central bank's nine-member Policy Board voted unanimously for the emergency program designed to encourage financial institutions to invest in and lend to selected industrial sectors, possibly including energy, the environment and health care.
''We expect today's decision will further enhance financial institutions' efforts to strengthen the foundations for economic growth through the use of a wider range of financial techniques,'' BOJ Governor Masaaki Shirakawa told reporters.
The BOJ wants to signal its intention to curtail Japan's long-term economic downturn, Shirakawa said, while indicating the bank could take further policy easing, considering that cash demand could rise as reconstruction work following the March 11 disaster proceeds.
After its two-day meeting through the day, the board also kept the key short-term interest rate steady at around zero to 0.1 percent and maintained the 10 trillion yen asset-purchase fund, while upgrading its basic assessment of the economy by noting a slight recovery from the March 11 disaster.
''Japan's economy continues to face downward pressure, mainly on the production side, due to the effects of the earthquake disaster, but is showing some signs of picking up,'' the board said in a statement.
Shirakawa noted a recovery in the nationwide supply-chain of industrial products as well as in electricity supply, both disrupted after the quake. The recovery of ''production activity has been proceeding slightly faster than we had expected in our April report,'' he said.
But the governor underlined the rebound in industrial output had been largely expected given its sharp falls after the disaster, and that the speed of Japanese economic recovery in the longer term would rather depend on how strongly the global economy expands.
Economists were skeptical about any immediate favorable impact on the country's economic growth from the latest policy decision by the BOJ.
Masamichi Adachi, senior economist at JPMorgan Securities Japan Co., said, ''The decision by the BOJ came almost in line with its view that Japan's economic growth has been declining as only fewer people can make riskier investments.''
''It seems that even the BOJ is skeptical about any short-term effect of the policy itself,'' he said, but added the central bank ''hopes this could have a pump-priming effect'' that would help buck such a risk-averse trend in longer terms.
Last year, the BOJ introduced a similar program to offer 3 trillion yen in low-interest lending and has already extended over 2.9 trillion yen. Its latest decision expanded the scope of companies which can benefit from the scheme.
Under the new program, the BOJ will extend a total of 500 billion yen to financial institutions at an interest rate of 0.1 percent per annum for up to four years.
The loan will be offered against certain collateral and to lenders conducting equity investments in and offering loans without conventional collateral or guarantees to the companies that are smaller but have leading technologies.
But the move came against concerns including that the central bank offering cheaper loans could trigger a race for commercial lenders to lower their interest rates as they need to attract customers, and could consequently weaken the financial standing of the lenders.
The central bank's nine-member Policy Board voted unanimously for the emergency program designed to encourage financial institutions to invest in and lend to selected industrial sectors, possibly including energy, the environment and health care.
''We expect today's decision will further enhance financial institutions' efforts to strengthen the foundations for economic growth through the use of a wider range of financial techniques,'' BOJ Governor Masaaki Shirakawa told reporters.
The BOJ wants to signal its intention to curtail Japan's long-term economic downturn, Shirakawa said, while indicating the bank could take further policy easing, considering that cash demand could rise as reconstruction work following the March 11 disaster proceeds.
After its two-day meeting through the day, the board also kept the key short-term interest rate steady at around zero to 0.1 percent and maintained the 10 trillion yen asset-purchase fund, while upgrading its basic assessment of the economy by noting a slight recovery from the March 11 disaster.
''Japan's economy continues to face downward pressure, mainly on the production side, due to the effects of the earthquake disaster, but is showing some signs of picking up,'' the board said in a statement.
Shirakawa noted a recovery in the nationwide supply-chain of industrial products as well as in electricity supply, both disrupted after the quake. The recovery of ''production activity has been proceeding slightly faster than we had expected in our April report,'' he said.
But the governor underlined the rebound in industrial output had been largely expected given its sharp falls after the disaster, and that the speed of Japanese economic recovery in the longer term would rather depend on how strongly the global economy expands.
Economists were skeptical about any immediate favorable impact on the country's economic growth from the latest policy decision by the BOJ.
Masamichi Adachi, senior economist at JPMorgan Securities Japan Co., said, ''The decision by the BOJ came almost in line with its view that Japan's economic growth has been declining as only fewer people can make riskier investments.''
''It seems that even the BOJ is skeptical about any short-term effect of the policy itself,'' he said, but added the central bank ''hopes this could have a pump-priming effect'' that would help buck such a risk-averse trend in longer terms.
Last year, the BOJ introduced a similar program to offer 3 trillion yen in low-interest lending and has already extended over 2.9 trillion yen. Its latest decision expanded the scope of companies which can benefit from the scheme.
Under the new program, the BOJ will extend a total of 500 billion yen to financial institutions at an interest rate of 0.1 percent per annum for up to four years.
The loan will be offered against certain collateral and to lenders conducting equity investments in and offering loans without conventional collateral or guarantees to the companies that are smaller but have leading technologies.
But the move came against concerns including that the central bank offering cheaper loans could trigger a race for commercial lenders to lower their interest rates as they need to attract customers, and could consequently weaken the financial standing of the lenders.
