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MNI POLICY: Repayment of Debt, Credit Costs In FY21 BOJ Worry

MNI (Sydney)
TOKYO (MNI)

Bank of Japan officials are vigilant against the the risk that liquidity problems will become solvency problems and credit costs will rise over the fiscal year beginning on April 1, MNI understands.

Despite the second state of emergency, credit costs haven't increased so far and liquidity concerns have not yet become solvency issues this fiscal year, as businesses have pre-emptively ensured liquidity.

The focus is now on how businesses handle their accumulated debts in fiscal 2021, amid hopes for the economic recovery and rollouts of vaccines as debt repayments loom.

The contrast between manufacturers and non-manufacturers has widened more than the BOJ expected in October, increasing further pressure on face-to-face businesses and smaller firms.

Bank officials judged that a rebound in the automobile and IT-related industries was bigger than their forecast in October, supporting profits and sales at manufacturers.

They also cited growing hopes for vaccine rollouts as positive news, but the second state of emergency was beyond their forecast in October, when the BOJ compiled its Financial System Report.

The next BOJ FSR to be released in mid-April will be focused on the repayment of debts, as the number of firms that close businesses or go bankrupt is set to increase.

It will also be focused on whether regional banks have been able to increase profits, MNI understands.

MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
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MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
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