MNI INSIGHT: BOJ Moves Forward Special Funds Decision Timeframe

The Bank of Japan has moved up its decision date to mid-December on whether to extend special corporate finance measures and add more help for smaller firms because of market volatility linked to the Omicron variant, and the Fed moving to tighter conditions , MNI understands.

Bank officials see the need to support major firms buffeted by stock market volatility caused by the Omicron variant and widening corporate bond spreads that make funding more expensive. The BOJ could move after the Fed's Dec. 14-15 meeting where it is expected to announce a faster taper and potentially sooner rate hikes in 2022.

For smaller firms, mainly in the services sector, the BOJ is ready to look at ways to ensure liquidity to prevent severe financial conditions, but not offering blanket guarantees, see: MNI INSIGHT: BOJ May Mull New Measures For Smaller Firms.

BOJ Governor Haruhiko Kuroda expects smaller face-to-face companies to rebound as vaccination rates increase and with lockdowns widely ended, but there is also concern on the BOJ board of a slower pace of recovery.

An earlier timeframe hinged on the December Tankan business sentiment survey on Dec. 13, followed by the Dec. 16-17 policy meeting as well as the overall progress of vaccinations and infection rates into early next year for a final decision at the Jan. 17-18 policy meeting.

BOJ board member Seiji Adachi last week said that an extension beyond March is an “open question” now.

An extension of the BOJ measures would come as a fiscal boost is on the cards by Japan's new government and the central bank is ready to buy additional government bonds to ensure the yield curve stays at low levels.