Bank of Japan steps up support for corporate borrowing

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."

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