Advertisement
Advertisement

BOJ policymaker signals chance of ending pandemic-relief programmes

By:
Reuters
Updated: Dec 2, 2021, 06:51 UTC

By Leika Kihara TOKYO (Reuters) - The Bank of Japan will continue to seek ways to improve its policy framework to mitigate the cost of monetary easing, board member Hitoshi Suzuki said, warning of the strain prolonged ultra-low interest rates could inflict on bank profits.

A security guard walks past in front of the Bank of Japan headquarters in Tokyo

By Leika Kihara

TOKYO (Reuters) -The Bank of Japan may end its pandemic-relief funding programmes in March as corporate funding conditions have improved significantly from the cash crunch last year caused by the COVID-19 crisis, board member Hitoshi Suzuki said on Thursday.

The fate of the programmes will depend much on how the spread of the Omicron variant affects the economy, he added.

The central bank is expected to debate at this month’s policy meeting whether to extend the March 2022 deadline for a package of steps introduced last year to address immediate corporate funding strains caused by the pandemic.

While Suzuki said he was undecided on the fate of the programmes, he stressed that many companies have seen funding conditions improve thanks in part to massive government and central bank support to cushion the economic impact of the pandemic.

Funding conditions have improved particularly for big companies, leading to a narrowing of spread for Japan’s corporate bond and commercial paper, he added.

“The programmes must be terminated at some point in the future,” as they were introduced as a temporary measure to deal with the pandemic’s initial hit, Suzuki told a news conference.

“Banks have abundant cash and can help borrowers through regular operations. As such, terminating the BOJ’s programmes would be an option,” said Suzuki, a former commercial banker.

Under the programmes, the BOJ has ramped up purchases of corporate bonds and commercial paper to help big firms procure funds. It also has a separate programme aimed at channeling funds to small firms through financial institutions.

With the pandemic still hurting the economy, many analysts expect the BOJ to maintain the programmes beyond March. But some analysts say the BOJ could dial them back, possibly by reducing corporate bond and commercial paper purchases.

BOJ policymakers have held internal discussions on phasing out the programmes, which were intended to be temporary measures, on condition that infections continue to fall, sources have told Reuters.

(Reporting by Leika Kihara;Editing by by Muralikumar Anantharaman, Shri Navaratnam & Simon Cameron-Moore)

About the Author

Reuterscontributor

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV. Learn more about Thomson Reuters products:

Did you find this article useful?

Advertisement