BOJ to provide 30 tril. yen to aid virus-hit small firms

22, May. 2020

Photo by Ray Reyes on Unsplash
Photo by Ray Reyes on Unsplash

TOKYO, Kyodo - The Bank of Japan decided Friday to provide a further 30 trillion yen ($278 billion) to broaden support for corporate financing until the end of March 2021, targeting small and medium-size companies hit by the novel coronavirus pandemic.

At its first unscheduled meeting since November 2011, the central bank decided to start providing the funds to financial institutions such as regional banks in June in a bid to prod them to increase loans to smaller companies and individual business operators.

The BOJ said its total support for corporate financing will total 75 trillion yen. The new 30 trillion yen scheme comes after the BOJ in late April introduced a 25 trillion yen loan program mainly aimed at helping large companies and raised the ceiling for purchases of corporate bonds and commercial paper by the central bank to up to 20 trillion yen.

To encourage lenders, the central bank will pay 0.1 percent interest on the loans made to small and midsize companies while pledging to extend the purchase period of corporate bonds and commercial paper until the end of March from the initial plan through late September.

The government decided last month to introduce a fresh scheme to provide loans to small and midsize companies without interest and collateral via financial institutions as part of an economic stimulus package to rescue businesses suffering from loss of financing amid the spread of the coronavirus.

BOJ Governor Haruhiko Kuroda instructed his officials at a policy meeting on April 27 to swiftly consider the new measure to financially back the government's new policy.

On Thursday, the government decided to keep the Tokyo metropolitan area and Hokkaido under a state of emergency declared over the pandemic, asking people to stay at home as much as possible, while lifting it in Osaka, Kyoto and Hyogo prefectures in western Japan.

The metropolitan area covers Tokyo and neighboring Chiba, Kanagawa and Saitama prefectures. Japan had already removed stay-at-home requests in its 39 other prefectures.

At the Friday meeting, the BOJ maintained its current ultraeasy monetary policy unchanged, keeping short-term interest rates at minus 0.1 percent while guiding long-term rates around zero percent, with unlimited government bond purchases.

"The Bank will continue to support financing mainly of firms and to maintain stability in financial markets," the BOJ said in a statement, adding it "will not hesitate to take additional easing measures if necessary."

Kuroda did not hold a press conference on Friday, breaking from the custom of explaining the reasons behind decisions to reporters following the bank's policy meetings.

The BOJ's last unscheduled meeting in 2011 was held to discuss responses to the sovereign debt crisis in Europe.

The central bank is scheduled to hold its next regular two-day policy meeting from June 15. (Kyodo)