UPDATE 2-BOJ may lend at least $11 bln in loan scheme-sources

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

* BOJ likely to announce details of scheme June 14-15

* BOJ’s new loan scheme to begin in September – Asahi
(Recasts with confirmation)

By Leika Kihara

TOKYO, June 2 (BestGrowthStock) – The Bank of Japan may lend at least
1 trillion yen ($11 billion) to commercial banks under a new loan
programme it outlined last month to support industries with
growth potential, sources familiar with the bank’s thinking said.

The exact amount has yet to be decided and the BOJ may set a
higher cap if demand for funds from commercial banks is strong,
the sources said.

“It won’t be too big an amount like 10 trillion yen. But
several hundred billion yen would be too small,” one of the
sources said. Another source expressed a similar view. Both
declined to be named due to the sensitivity of the matter.

In what it sees as a long-term approach to beating deflation,
the BOJ outlined a programme last month under which it offers
one-year loans at 0.1 percent interest to banks that will fund
projects in sectors with growth potential. [ID:nTOE64K025]

The central bank will allow the loans to be rolled over
several times, meaning commercial banks can borrow from the BOJ
for several years at the overnight call rate.

It is expected to announce details of the framework, such as
when it will start, when it will expire and the amount of funds
to be offered, at its next policy-setting meeting on June 14-15.

BOJ Governor Masaaki Shirakawa has said the central bank may
set a limit to the amount of loans that will be extended, so the
money flowing into the economy would not influence monetary
policy.

The BOJ is still having consultations with commercial banks
in mapping out details of the scheme.

The Asahi newspaper reported on Wednesday that the BOJ will
lend at least 1 trillion yen under the programme with Japan’s
three megabanks to be offered 100 billion yen each. Lending will
begin from September, the paper said without citing sources.

The BOJ has said the loan plan is not intended to be monetary
easing but is aimed more at encouraging commercial banks to
cultivate industries with new areas of growth.

The BOJ has kept interest rates near zero since late 2008 and
loosened monetary policy through a facility offering cheap funds
to banks. While that has helped the economy recover from a severe
slump after the Lehman crisis, Japan remains mired in grinding
deflation due largely to weak domestic demand.

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UPDATE 2-BOJ may lend at least $11 bln in loan scheme-sources