MNI POLICY: BOJ Minutes: Worry On Jobs Over Bankruptcies; NPLs

     TOKYO (MNI) - Some Bank of Japan board members warned at the April 27

meeting that although employment was not then showing significant deterioration,

the longer Covid-19 effects lasted, the situation would worsen as business

conditions fell and bankruptcies grew, the minutes of the meeting released

Friday showed.

     "One member commented that, given that financial institutions supported

firms of which financial positions had deteriorated due to the impact of

COVID-19, developments in the financial system should be monitored closely with

caution, keeping in mind the possibility that a certain proportion of loans

would become nonperforming," the minutes showed.

     The BOJ at the meeting moved to boost its easy policy, aiming to strengthen

its support for corporate financing and shield the wider economy, both hard hit

by the fallout from the coronavirus outbreak.

     The BOJ also decided on further boost its purchases of Japanese government

bonds and Treasury bill, removing "at an annual pace of about JPY80 trillion"

from its statement, giving itself unlimited firepower if needed.

     --INTERMEDIATION COULD WEAKEN

     Regarding risks to the financial system, "some members expressed the

recognition that the functioning of financial intermediation could weaken, due

mainly to a rise in banks' credit costs, if the impact of COVID-19 led to

prolonged deterioration in the real economy and a decline in firms'

creditworthiness."

     The minutes also showed some "paying close attention to divergence that had

begun to emerge between stock prices and the ongoing weakness in the real

economy."

     The BOJ board members largely agreed that the BOJ should make utmost

efforts to protect employment, businesses and people's livelihoods until the

spread and threat subsided, with at least one member pointing to the essential

need for a cooperative framework with government and global peers.

     --FIRMS' CAPITAL WORRY

     The minutes of an extraordinary May 22 meeting, also published Friday,

showed and increased concern over non-performing loans as corporate capital

levels could become impaired.

     At the meeting, the BOJ kept monetary policy unchanged, but announced the

guidelines for a new JPY30 trillion lending facility to support smaller firms'

financing.

--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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