BOJ unveils new lending plan
By Tomoko A. Hosaka |
May 22, 2010, Saturday
|
Print Edition
Print Edition
JAPAN'S central bank yesterday outlined a new lending program for commercial banks in its latest attempt to fight deflation and fuel economic growth.
The plan accompanied the Bank of Japan's more upbeat view of the economy and a decision to keep its key interest rate near zero.
As widely expected, the BOJ's policy board voted unanimously to leave its overnight call rate target at 0.1 percent. The bank has not touched the rate since December 2008.
It upgraded its assessment of the Japanese economy, saying the country is "starting to recover moderately" thanks to global economic growth. Exports and factory output rose, which is leading to bigger capital investments by companies, it said. Government stimulus measures are also driving consumer demand at home.
Gross domestic product figures released on Thursday showed that Japan's economy grew at a robust annualized pace of 4.9 percent in the January-March quarter.
The central bank, however, warned of potential fallout from Europe's debt problems. It also reiterated that it would keep monetary policy "extremely accommodative" to help fight persistent deflation. Consumer prices fell for the 13th straight month in March.
"The bank recognizes that Japan's economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability," the policy board said in its statement.
As part of efforts to bolster domestic demand, the central bank crafted a preliminary framework for a new loan facility designed to encourage private banks to lend money to businesses.
To participate in the loan program, financial institutions will need to submit a plan for "strengthening the foundations for economic growth." Approved banks will be able to borrow money for one year at an annual interest rate of 0.1 percent.
The plan accompanied the Bank of Japan's more upbeat view of the economy and a decision to keep its key interest rate near zero.
As widely expected, the BOJ's policy board voted unanimously to leave its overnight call rate target at 0.1 percent. The bank has not touched the rate since December 2008.
It upgraded its assessment of the Japanese economy, saying the country is "starting to recover moderately" thanks to global economic growth. Exports and factory output rose, which is leading to bigger capital investments by companies, it said. Government stimulus measures are also driving consumer demand at home.
Gross domestic product figures released on Thursday showed that Japan's economy grew at a robust annualized pace of 4.9 percent in the January-March quarter.
The central bank, however, warned of potential fallout from Europe's debt problems. It also reiterated that it would keep monetary policy "extremely accommodative" to help fight persistent deflation. Consumer prices fell for the 13th straight month in March.
"The bank recognizes that Japan's economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability," the policy board said in its statement.
As part of efforts to bolster domestic demand, the central bank crafted a preliminary framework for a new loan facility designed to encourage private banks to lend money to businesses.
To participate in the loan program, financial institutions will need to submit a plan for "strengthening the foundations for economic growth." Approved banks will be able to borrow money for one year at an annual interest rate of 0.1 percent.
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