BOJ Says Need for Credit Steps Waning, Minutes Show
Bank of Japan board members said last month that the need for the central bank’s emergency credit-easing programs was decreasing as companies were finding it easier to raise funds, minutes show.
“A few members were of the view that the positive effects these measures could produce were on the wane,” according to the minutes of their Sept. 16-17 meeting published in Tokyo today. One policy maker said the measures were in place as a “safety net.”
The central bank last week raised its evaluation of the economy for a second month, saying companies cut spending at a slower pace and their access to private funding improved. Economists say Governor Masaaki Shirakawa and his colleagues will decide as soon as this month to end their purchases of corporate debt from lenders by Dec. 31 as scheduled.
“The reasons to maintain the programs have clearly diminished,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. “Financial markets have already factored in an end to the measures.”
Since lowering the benchmark interest rate to 0.1 percent in December, the bank started buying commercial paper and corporate bonds from lenders and offering them unlimited loans backed by collateral to channel funds to companies. The policy board extended the three plans to Dec. 31 in July.
The yen traded at 90.91 per dollar as of 9:13 a.m. in Tokyo from 91.00 before the minutes were released.
Commercial Paper
At last month’s meeting, many board members said companies with “low” credit ratings were finding it easier to sell commercial paper, which are short-term securities used to fund everyday business activities such as payment of rent and salaries.
One policy maker said the central bank’s purchases of commercial paper were having an “overly strong” impact on financial markets because they drove interest rates on some of the more highly rated securities in particular “below yields on government bills,” the minutes showed.
Many members said “it might not be appropriate to consider that Japan’s financial conditions remained severe just because the issuance of low-rated corporate bonds had been limited.”
Shirakawa said last week that his board will persist with its policy of holding interest rates “very low” and maintain a “very accommodative” stance. The eight board members voted to keep the key rate at 0.1 percent at their latest meeting ended Oct. 14. Their next meeting is on Oct. 30.
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