BOJ may hold an emergency meeting on a new pandemic credit plan

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The Bank of Japan could hold an emergency meeting ahead of a scheduled interest rate review in June to develop a reward plan for financial institutions that encourage lending to small businesses affected by the coronavirus, Governor Haruhiko Kuroda said Thursday.

Japan’s $ 1.1 trillion stimulus package offers cheap credit to businesses hit by a virus-induced drop in sales, and Kuroda has instructed employees to come up with a plan to encourage financial institutions to increase lending to such businesses.

“We want to prepare the plan before the next meeting in June,” Kuroda told the state parliament, adding that the BOJ had to work out details with government agencies, but wanted to draw up the plan as soon as possible.

“We’ll try to get the plan rolling quickly, even if that means holding an emergency meeting.”

The BOJ conducts eight scheduled interest rate reviews each year, with the next scheduled for June 15-16. It is rare for the central bank to hold an unscheduled meeting that only happens when impending changes in the economy require a quick monetary policy response.

Kuroda said it might be difficult for the BOJ to accept collateral in the form of individual household loans when lending cheap loans to financial institutions.

“But we are expanding the range of private debt that we accept as collateral so that both households and small and medium-sized businesses can benefit,” he added.

The BOJ on Monday increased monetary stimulus to combat the widening aftermath of the pandemic, which has brought the economy to the brink of deep recession by forcing families to stay home and close businesses.

Most BOJ measures so far target large companies that can easily borrow from banks or enter credit markets, which poses the challenge for policy makers to reach smaller companies that could go under without immediate financial support.

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