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Japan Central Bank to Launch $33B Credit Program
Source: forbes.com
Source Date: Tuesday, June 15, 2010
Country: Japan
Created: Jun 21, 2010

Japan's central bank on Tuesday unveiled details of a new $33 billion low-interest lending scheme intended to fuel economic growth and fight deflation. The plan accompanied the Bank of Japan's decision to keep its key interest rate near zero. As widely expected, the eight-member policy board voted unanimously to leave the overnight call rate target at 0.1 percent. The bank has not touched the rate since December 2008. It cited robust overseas demand for helping the world's second biggest economy continue a moderate recovery. Exports and production are up, and corporate capital investment is climbing. Government stimulus measures are also driving consumer demand at home.

The jobs and wages situation "remained severe, but the degree of severity has ease somewhat," the central bank said. It pledged to keep monetary policy "extremely accommodative" to fight deflation and foster sustainable growth in the country. As part of those efforts, the Bank of Japan's new funding program is designed to encourage private banks to lend money to businesses in growth sectors such as environment, energy, elderly care and tourism. "The most critical challenge the Japanese economy is currently facing is to raise the potential economic growth rate and productivity," the Bank of Japan said in its statement.

Through the lending facility, commercial banks will have access to a total 3 trillion yen ($32.8 billion). Approved banks will be able to borrow up to 150 billion yen each for up to four years at an annual interest rate of 0.1 percent. The central bank aims to start the program by the end of August.
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