May 19, 2020 / 8:56 AM / 10 days ago

BOJ's emergency meeting to decide loan scheme for virus-hit small firms

TOKYO (Reuters) - The Bank of Japan will hold an emergency policy meeting on Friday to set up a reward scheme for financial institutions that boost lending to small firms hit by the coronavirus pandemic.

A Japanese flag flutters atop the Bank of Japan building under construction in Tokyo, Japan, September 21, 2017. REUTERS/Toru Hanai

The emergency meeting will be held from 9 a.m. (0000 GMT) on Friday, the central bank said in a statement on Tuesday.

BOJ Governor Haruhiko Kuroda has said the central bank may hold an emergency meeting before a scheduled rate review in June to sign off on a scheme his staff has been working on under an order he issued last month.

According to an outline of the scheme released in April, the BOJ plans to finance loans that commercial banks extend to small businesses via funds tapped from government lending programmes.

The central bank would also pay 0.1% interest to commercial banks that boost such lending.

At Friday’s meeting, the BOJ is likely to decide on details of the scheme such as the terms of loans that will be eligible and under what conditions commercial banks can receive the 0.1% interest.

The central bank is widely expected to keep other monetary settings unchanged, including its interest rate targets.

Under a policy dubbed yield curve control, the BOJ guides short-term rates at -0.1% and the long-term rate around zero via aggressive asset purchases.

Japan’s economy slipped into recession for the first time in 4-1/2 years in the last quarter, putting the nation on course for its deepest postwar slump as exports and consumption crumbled from the coronavirus crisis.

The scheme to be finalised on Friday is part of the BOJ’s efforts to ease corporate funding strains caused by the pandemic.

Reporting by Leika Kihara; Additional reporting by Daniel Leussink; Editing by Jacqueline Wong

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