Bank of Japan Steps up Loans Programme

The Bank of Japan (BoJ) is expanding two key lending programmes in a bid to further boost Japanese economic growth.

The country’s central bank has doubled the size of one facility to 7 trillion yen (JPY) – the equivalent of US $68bn and doubled the amount of money that Japanese banks can borrow at low rates from before under the second programme. It also prolonged the duration of both schemes by an additional year.

BoJ governor, Haruhiko Kuroda, said the expansion aimed to enhance the transmission mechanism of quantitative easing (QE) by encouraging banks to boost lending instead of sitting on piles of cash. “We have an engine with big horsepower, so it makes sense to have stronger tyres,” he announced to reporters.

The central bank also said that there was no change to its assessment that Japan is recovering moderately, signaling that it remains confident the world’s third-largest economy can withstand the impact of a forthcoming sales tax increase from 5% to 8% in April without additional stimulus.

However, the BoJ’s move came a day after Japan reported disappointing growth numbers for the final quarter of last year. The country’s gross domestic product (GDP) rose by 1% on an annualised basis in Q413, much lower than analyst forecasts of an expansion of close to 2.8%.

The weaker than expected data had raised questions on whether Japan’s recovery – triggered by a series of aggressive stimulus and policy moves that characterise so-called ‘Abeconomics’ introduced under prime minister Shinzo Abe over the past year – is sustainable.

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