The Bank of Japan will accept BBB-rated corporate debt as collateral for loans for the first time, in an effort to aid companies struggling for financing.
The bank will lend an unlimited amount over the end of this year against corporate bonds, charging interest at its target overnight call rate. Full details of the scheme will be resolved in a meeting later this month. Both operations will run until April 30 next year - after the end of the Japanese tax year.
The news came after today's unscheduled monetary policy meeting, which left the bank's target rate at 0.3%.
The Bank of Japan joined in October's efforts to restore liquidity to the interbank market, stepping up dollar lending to banks and expanding its list of accepted collateral to include asset-backed commercial paper. But it held back from significant rate cuts, arguing that the crisis had had less impact on the Japanese market.
This may no longer be true. The bank said today: "Japan's financial markets remain relatively stable compared with those in the US and Europe. However, financial conditions in Japan have become less accommodative on the whole, as the financial positions of small firms have deteriorated and an increasing number of large firms have faced a worsening in funding conditions in the markets."
See also: Bank of Japan joins money market rescue
Central banks promise unlimited dollar lending
Rate cut not meant for financial markets, central banks say
Risk USA: IMF unveils dire global economic outlook for 2009
More on Structured Products
ECB rate cut to drive modest recovery in eurozone
Correlation sensitivity in multi-asset structured products explained
UK investors offered autocallable in conservative or bullish versions
Schlumberger product puts capital at risk if American barrier is breached
Sign up for Risk.net email alerts
Nominated for two technology awards
Nominated for post trade technology award
Sponsored webinar: Collateral and counterparty tracking
Isda directors warn on fragmentation, access and liquidity - but expect problems to pass
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.