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MNI STATE OF PLAY: BOJ Mulls Climate Change Support For Banks

TOKYO (MNI)

BOJ leaves policy settings unchanged, extends period for small firm financing and offers details of 'green' support for banks.

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Bank of Japan Governor Haruhiko Kuroda flagged Friday that the BOJ has begun discussions on new measures to support commercial banks' investments or loans to address climate change issues, with outcomes likely to be laid out as early as July.

Policymakers will release their preliminary outline of their findings at the July 15-16 policy meeting, with the BOJ noting the profound impact the changing environment will have on the economy and policy in future.

"This is a new approach to tackling climate changes as they could exert an extremely large impact on developments in economic activity and prices as well as financial conditions from a medium- to long-term perspective," Kuroda told reporters, without offering any depth to his answers.

He added that the BOJ will launch the new measures before the end of the year.

Kuroda was speaking after the BOJ board decided to maintain yield curve control policy and left the short-term policy interest rate at -0.1% and the long-term interest rate target at around zero percent, although vowing to act 'without hesitation' if necessary through the Covid recovery. The bank also extended its program to support smaller firms' financing by 6 months until the end of March 2022, in line with the government's decision of extending its no interest, no collateral loans, as highlighted in MNI's preview.

ABSTENTION

Outgoing Bank of Japan board member Takako Masai abstained from voting at today's policy meeting, a spokesperson said on Friday.

She judged abstaining from voting was the right thing to do to keep neutrality as she is reportedly moving to an executive position in a private company soon. Masai's five-year term ends on June 29. This is the first abstention since December 2004, when the then board member Atsushi Mizuno didn't vote.

Addressing the global inflation outlook, Kuroda said the BOJ must keep a close eye on whether businesses at home will be able to transfer higher costs to retail prices, but said higher raw material costs were in part due to the global recovery.

Kuroda indicated that the BOJ's monetary policy will not be influenced the U.S. Federal Reserve if it moved up the timing of tapering, as "Japan is still far from the achievement of 2% price target and the BOJ must maintain easy policy for the time being. He warned that any Fed tapering, if realized, could weaken the yen from current levels.

He said the outlook for Japan's economy is brightening, but the BOJ must pay attention to the face-to-face service sector, although he noted that if the vaccine rollout accelerates, positive or forward-looking economic activity will strengthen. But Kuroda said that his remarks are his personal view, not the board view, and they won't immediately impact monetary policy as that is determined by voting.