FACTBOX-BOJ’s new loan scheme to support growth areas

(For more stories on the Japanese economy click [ID:nECONJP])

TOKYO, May 21 (BestGrowthStock) – The Bank of Japan said on Friday it
will offer one-year loans at 0.1 percent to encourage commercial
banks to lend more to industries with growth potential.

Below are details of the new framework decided at a two-day
policy meeting:

— The BOJ will offer fixed-rate loans with a maturity of one
year, in principle, to private banks at the overnight call rate
of 0.1 percent.

— Banks can roll over the loans so they can be used to fund
long-term investment. That means they can borrow from the BOJ for
several years if necessary to fund long-term investment.

— The loans will be made against pooled collateral with the
same standards applied as in the BOJ’s regular money market
operations.

— The funds will be available to private banks that submit
their plans to support industries with growth potential. The BOJ
will assess the plans and determine how much it will loan to
banks, and for how long.

— When it starts the programme the BOJ will fix the amount
of funds that will be available, the period for accepting
applications and how many times banks can roll over the loans,
based on applicants’ loan and investment records.

— It hopes to start lending under the new programme from
around the summer.

— The BOJ did not define which industries would be regarded
as having “growth potential”.

— But Governor Masaaki Shirakawa said the central bank will
take into account the government’s definition of industries with
growth potential when setting details of the programme. Among the
industries cited by the government are environment, health care,
and tourism, as well as research and development.

— The BOJ wants to design the new loan programme so it is
applicable to a wide range of industries. It plans to keep the
criteria broad enough to give commercial banks flexibility in
deciding which industries to lend to.

— The BOJ did not announce a target or an estimate of the
amount of lending that will be made under the programme. The
scheme will not be a permanent one and a deadline will be set
possibly by the time of its next policy meeting in June.

— The BOJ says the new loan scheme is not aimed at
influencing the yield curve but at redirecting money to growth
industries. This means the amount on offer under the programme
should not be huge.

— Shirakawa instructed BOJ staff last month to consider a
scheme to redirect money to industries with areas of potential
new demand. He said the framework would be part of an effort to
boost Japan’s potential economic growth, which is now around 0.5
percent, and pull it out of deflation.

Stock Market Today

(Reporting by Leika Kihara and Rie Ishiguro; Editing by Michael
Watson)

FACTBOX-BOJ’s new loan scheme to support growth areas