MNI POLICY: BOJ New Lending Facility; Keeps Yield Curve Policy

     TOKYO (MNI) - The Bank of Japan board kept monetary policy unchanged at

Friday's additional policy meeting, but announced the guidelines for a new

lending facility to support smaller firms' financing.

     The scale of the new lending facility to support smaller firms' financing

is JPY30 trillion, the BOJ said.

     "The BOJ will provide funds to eligible counterparties pooled collateral

for up to 1 year at the loan rate of zero percent with the maximum amounts

outstanding of eligible loans reported by those counterparties," the

post-meeting statement said.

     Interest-free and unsecured loans will based on the government's emergency

economic measures and loans guaranteed by the credit guarantee corporations in

response to Covid-19, it added.

     "Loans to small and medium-sized firms affected by Covid-19 which are

equivalent to in terms of loan conditions (the maximum amount for each eligible

counterparty: JPY100 billion)."

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

scheme will be zero percent, but 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 to lenders.

     The bank's fund-provisioning through the new measure will start in June,

taking into account loans made by financial institutions as of end-May.

     --EXTENDED DURATION

     In addition to the purchases of commercial paper and corporate bonds

(maximum amount outstanding JPY20 trillion) and the special funds-supplying

operations (JPY25 trillion), the new lending facility adds JPY30 trillion of

available funds.

     The total amount of the three program is JPY75 trillion and the BOJ decided

to extend the duration of these measures by 6 months until the end of March

2021.

     "By conducting these measures, the BOJ will continue to support financing

mainly of firms and to maintain stability in financial markets. On this basis,

it will closely monitor the impact of the Covid-19 for the time being and will

not hesitate to take additional easing measures if necessary," the BOJ said.

     Policymakers held the extraordinary meeting to just decide on the guideline

for the new lending scheme and didn't discuss developments of economic and price

conditions, which will discussed at the regular policy meeting scheduled on June

15-16.

     Governor Haruhiko Kuroda will nit hold a post-meeting press conference this

Friday.

--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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