BOJ starts policy meeting, eyes extension of emergency policies

TOKYO, Feb. 18 Kyodo -
The Bank of Japan started a two-day policy meeting Wednesday and is expected to
extend its emergency policy measures to support corporate finance amid the
global economic downturn and financial turmoil.
During the meeting through Thursday, the central bank is also likely to hold
its key interest rate steady at 0.1 percent and discuss the details of
envisaged outright purchase of corporate bonds from financial institutions.
The BOJ announced the same day it will resume purchasing stocks held by banks
next Monday in an attempt to boost their balance sheets and encourage them to
lend more to businesses.
It plans to buy up to 1 trillion yen (about $10.8 billion) in bank-held shares
as a temporary step effective through April next year. The decision came as
banks and other financial institutions are incurring losses on their stock
investments given the financial turbulence.
The BOJ conducted a similar operation for some two years from 2002.
In its battle against the current global recession, the BOJ has introduced a
series of special measures including the outright purchase of commercial paper,
or short-term debt issued by companies, from financial institutions.
The bank is considering conducting the CP purchase beyond its initial deadline
of late March. Among other policies, the BOJ is also studying extending the
deadline of an emergency loan program for those institutions from the end of
April, sources close to the matter said.
The BOJ has said those policies are temporary methods designed to help
companies raise capital to cover the approaching end of fiscal 2008 through
next month. Demand for cash usually rises before the end of a business year.
But the sources said the central bank now believes the measures would be
effective in assisting firms to withstand the credit turmoil into the new
fiscal year starting April 1.
As for the planned outright purchase of corporate bonds, the BOJ Policy Board
is expected to discuss the proposal to buy up to around 1 trillion yen worth of
the debt with a rating of single-A or higher and residual maturity of one year
or shorter.
The meeting of the decision-making board comes after the Group of Seven
industrialized economies renewed their pledge to fight the worldwide recession
together in their weekend meeting in Italy.
The G-7 -- Britain, Canada, France, Germany, Italy, Japan and the United States
-- expects the global downturn to continue to stifle economic growth through
this year.
The BOJ will look carefully at the Japanese economy, which has already faced a
''very tough'' environment, during the policy meeting, BOJ Governor Masaaki
Shirakawa told reporters Saturday after the G-7 meeting in Rome.
The nation's latest growth figures released Monday showed Japanese real gross
domestic product shrank an annualized 12.7 percent in the October to December
period from the previous quarter, the fastest pace of contraction in nearly 35
years, due mainly to slower exports amid the global recession.
==Kyodo