BOJ to Scale Back COVID-19 Financing Support for Large Firms

Tokyo, Dec. 17 (Jiji Press)--The Bank of Japan said Friday that it will scale back COVID-19-related financing support for large companies as financial conditions have improved for them. The central bank said it will terminate its additional purchases of commercial paper and corporate bonds from large companies at the end of March next year as scheduled. "With regard to the financial conditions around large firms, issuance conditions for CP and corporate bonds have been favorable," the BOJ said in a statement after a two-day monetary policy meeting. For smaller companies, the BOJ will extend its financing support by six months until the end of September next year. "Their financial positions have been on an improving trend on the whole, but weakness has remained in some segments, such as the face-to-face services industry," it said. "Uncertainty remains" for smaller businesses due to the emergence of the omicron variant of the novel coronavirus, BOJ Governor Haruhiko Kudoda told a news conference after the policy meeting, pledging to make all-out efforts to help the cash flow of such companies with the extension of the financing support. The BOJ's "tankan" quarterly business sentiment survey for December showed that industry sectors that have been hit hard by the coronavirus pandemic, including hotels and restaurant operators, continue to face financing difficulties. Therefore, the BOJ decided to extend the support for smaller businesses and carefully watch the infection situation. From April, the upper limit on the balance of CP and corporate bond purchases from large companies will gradually be reduced from 20 trillion yen to 5 trillion yen, the level before the coronavirus crisis. Kuroda said that there is less demand for the financing support for large companies, citing a favorable fund procurement environment for them. The balance of purchases is expected to return to pre-pandemic levels in about half a year for CP and in about five years for corporate bonds, Kudoda said. In the policy-setting meeting, the BOJ decided to keep its massive monetary easing policy unchanged. It will keep its short-term policy interest rate at minus 0.1 pct and guide 10-year government bond yields around zero pct. The central bank said, "Japan's economy has picked up as a trend, although it has remained in a severe situation due to the impact of COVID-19 at home and abroad." "For the time being, the bank will closely monitor the impact of COVID-19 and will not hesitate to take additional easing measures if necessary," the BOJ said. At the news conference, Kuroda said that "a little sunlight is coming for efforts to overcome the coronavirus and normalize economic activities," thanks chiefly to progress in vaccinations. Kuroda defended the BOJ's decision to continue its large-scale monetary easing at a time when the U.S. and European central banks are tapering their easing measures. "It is natural that monetary policy measures vary in terms of content and direction due to differences in the economic and price conditions," he said. END