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
Retail brokers accused of stealing bank business with little oversight
High-net-worth investors pile into dollar and commodity structures as PBoC loosens
Progress slowed by lack of standardisation and fear of triggering regulatory mandate
Low returns from traditional investments are driving Australia's pension industry to look more at alternative assets
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.