Bank of Japan maintains interest rate, introduces new credit measures

19 February 2009

Japan's central bank announced new measures to make funds easily available for corporates and has maintained interest rate at 0.1 per cent, unchanged for a second month in the worst economic crisis the country has faced since World War II.

The Bank of Japan said it will provide three-month funds to financial institutions at low interest rates and proposes to introduce Special Funds-Supplying Operations to facilitate corporate financing, such as establishment of principal terms and conditions of the special funds-supplying operations to facilitate corporate financing.

The bank had announced on Wednesday, its plans to buy up to one trillion yen shares ($10.7 billion) of corporate bonds with credit ratings of A or higher from commercial bank till the end of April 2010, in a move to ease companies' from raising funds before the end of fiscal year - 31 March as funding costs for companies had recently edged up, as indicated by the wider credit spreads on CP and corporate bonds.

The Bank of Japan at its policy board meeting in Tokyo today also extended the time frame for some of its existing emergency measures for US dollar funds- supplying operations against pooled collateral and collateral norms will include a wider range of assets in order to keep credit flowing to struggling companies.

The Bank of Japan will continue to buy short-term debt issued by companies, give low-interest loans to be collateralized by corporate bonds through the end of September and complementary deposit facility would be provided for an extended period.

The bank said in the wake of the severe financial and economic conditions, it has decided to take the following measures with a view to facilitating corporate financing and ensuring stability in financial markets.