The Bank of Japan doubles programmes to spur bank lending
The announced move is not so huge in the context of the Bank of Japan’s monetary easing programme, but if fully utilised, the facilities would add around JPY 20 trillion (USD 196 million). It was set to nearly double over two years to JPY 290 trillion by the end of 2014
The larger of the two facilities provides funds to banks in proportion to their increase in lending, was only used at a third of i9ts JPY 15 trillion capacity. As banks and corporations are flush with cash already, demand for loans, not supply seems to be the true constraint on credit growth in Japan.
The expansive monetary policy of the Bank of Japan forms part of the Abenomics experiment (attributed to the Japanese Prime Minister), but bank lending has been lukewarm, with outstanding loans up just 2.3 % from a year earlier in January. Experts are scared on how April’s sales-tax increase will ripple through the Japanese economy. The Bank of Japan Head Haruhiko Kuroda signalled that he is prepared to do still more should the Japanese economy falter. Upon these declarations there was a strong uptrend in the Japanese stock market.