UPDATE 2-BOJ seen moving slowly to expand growth area scheme

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

* Need time to assess effect of BOJ loan scheme -Nishimura

* BOJ board member Suda sounded more eager to boost scheme

* BOJ ready to boost scheme if popular, but not clear when

* Nearly half of 3 trln yen set aside to be disbursed this yr
(Rewrites; adds background, details)

By Rie Ishiguro and Leika Kihara

TOKYO, Dec 2 (BestGrowthStock) – The Bank of Japan needs more time to
assess the effect of its loan scheme targeting growth industries,
its deputy governor said, a day after a fellow board member
signalled that it could be expanded as the bank battles Japan’s
entrenched deflation.

Some BOJ officials do not rule out boosting the loan scheme
if it continues to draw strong demand, given that nearly half of
the 3 trillion yen ($36 billion) set aside will be disbursed this
year — well before its expiration in 2012.

But recent comments from BOJ policymakers show the central
bank has yet to reach a consensus on how soon to expand the
scheme, put in place in June as a long-term means of stimulating
domestic demand, which has lagged in Japan’s anaemic recovery.

“The support scheme has only just started. The time is not
yet ripe to evaluate its effects in a comprehensive manner,”
Kiyohiko Nishimura, one of the BOJ’s two deputy governors, told a
seminar on Thursday.

BOJ board member Miyako Suda sounded more eager to boost the
scheme on Wednesday, when she said there was room to make it more
attractive, perhaps by increasing its size or reviewing the
conditions for extending loans.

“At present, money does not flow into risk (assets) unless
the BOJ steps in, so we need to step in,” Suda told a news
conference in Yamagata, northern Japan.

“It’s not simply about the volume (of money). I hope to make
the scheme more effective in supporting growth industries by
thinking of whether there are some ways to improve it and, if so,
how.”

With interest rates already effectively at zero, the BOJ has
launched various measures aimed at funneling money into the
fragile economy and pulling it out of deflation.

One is the loan scheme, under which the BOJ will offer up to
3 trillion yen in cheap loans to commercial banks that lend to
industries with high growth potential, such as environmental
protection and health care. [ID:nTOE65E03M]

The BOJ plans to lend 998 billion yen in the second tranche
to be disbursed next week, more than double the amount extended
in the first disbursement in September, as more banks applied for
loans.

The central bank separately launched a 5 trillion yen asset
buying pool last month to directly purchase assets ranging from
government bonds to private debt.

That fund is a direct, short-term monetary easing measure,
whereas the loan scheme is a longer-term, less direct approach to
fighting deflation.
($1=84.17 Yen)
(Editing by Edmund Klamann)

UPDATE 2-BOJ seen moving slowly to expand growth area scheme