MNI POLICY: BOJ Friday Extra-Meet May Launch Lending Tool

--No other policy outcomes, economic outlooks expected at May 22 meet

By Hiroshi Inoue

     TOKYO (MNI) - The Bank of Japan confirmed Tuesday it will hold an

additional policy meeting this Friday, likely to announce a new lending facility

for smaller companies, with wider discussion of monetary policy and the economic

outlook left until the mid-June meeting, which itself could be cut back to a

single day gathering, depending on coronavirus developments, MNI understands.

     BOJ Governor Haruhiko Kuroda has said already that the BOJ wants to release

the new scheme, which could also be used to get funds to sole traders, as

swiftly as possible before the regular policy meeting, and the added gathering

is planned to do just that.

     -ACT AS NEEDED

     History has shown that the BOJ will meet to decide and announce

extraordinary measures beyond normal policy, including when the bank announced

the temporary U.S. dollar liquidity swap facility back in May 2010. In December

2008, the BOJ met discuss and introduce monetary market operations to facilitate

corporate financing.

     At both meetings, the BOJ left monetary policy unchanged and didn't offer

any economic assessment.

     Officials have been working out the fine details of the new lending

facility, including whether or not to set an upper limit, to lower the

loan-to-value ratio or to include bridge financing underpinned by the Financial

Services Agency.

     The FSA has been urging financial institutions to support smaller firms

through bridge financing to get over administrative issues and the BOJ is now

considering bringing that scheme into the new facility.

     --DETAILS

     Bank officials are surveying commercial banks to examine how often they

will be able to report eligible loans to the BOJ and how they processed

application for new loans.

     The BOJ is considering how often the bank extends the loans, such as based

on the balance of end-month.

     The BOJ has already said that the interest rate on loans under the new

scheme will be zero percent, saying it will pay 0.1% interest to banks' on the

balance of all loans extended to companies, which it hopes will ease rising

credit costs.

     The scale of no interest rate and no collateral loans by the government to

support smaller firms is JPY23 trillion, which will be a guide for the BOJ in

considering the size of the facility.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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