TOKYO — The Bank of Japan launched Friday a program to support small businesses, moving in step with Prime Minister Shinzo Abe’s government to keep the sector alive amid the coronavirus-sparked economic crisis.
Under the new program, adopted at an emergency meeting of the central bank’s policy board, the BOJ can lend to commercial banks without interest for up to one year if the banks make loans to small businesses. The commercial banks can receive 0.1% interest from the BOJ on the loans that they make.
For such loans to be accepted as collateral by the central bank, they have to be guaranteed by the government. The guarantee scheme is already in place as part of the government’s economic relief package. The government envisions guaranteeing up to 24 trillion yen ($222 billion) in commercial loans.
Small businesses are more vulnerable to economic shocks, owing to the lack of an adequate financial buffer.
Bankruptcies have been growing especially in such sectors as hotels and restaurants in Japan as people are asked to stay at home and the borders are closed to many foreigners. The government and BOJ initiatives come as commercial banks have started relaxing terms on loans to existing borrowers in an effort to keep them from going under.
No other change was made to the BOJ’s monetary policy Friday, with short-term interest rates kept at minus 0.1% and long-term rates at around zero. The central bank will continue to increase its holdings of Japanese government debt by 80 trillion yen a year.
The BOJ’s next scheduled policy meeting is slated for June 15 and June 16. At the previous meeting, on April 27, the central bank announced its intention to purchase Japanese government bonds “without setting an upper limit” in an effort to calm financial markets as the government launched massive relief programs through deficit spending.
Concerns have been growing about the economic impact of the state of emergency and the stay-at-home campaign since April 7. The Cabinet Office reported Monday that gross domestic product shrank a real annualized 3.4% in the January-March quarter, following the October-December fall of 7.3%.