Shirakawa Says Harder for Companies to Sell Debt

By Mayumi Otsuma

Jan. 16 (Bloomberg) -- Bank of Japan Governor Masaaki Shirakawa said it is becoming more difficult for the nation’s companies to sell debt as financial markets “deteriorate rapidly.”

“It’s becoming harder for companies to raise funds through commercial paper and corporate bond markets,” Shirakawa said today at a quarterly meeting of the bank’s regional chiefs in Tokyo. He said small companies and more large companies are reporting that it’s difficult to raise funds and that banks are becoming more reluctant to lend.

With interest rates already near zero, Shirakawa is looking for ways to unlock credit markets and prevent the nation’s recession from deepening. Policy makers may announce plans to buy corporate bonds to improve companies’ access to cash at a two-day rate setting meeting next week, economists say.

“The Bank of Japan is expected to focus on policy measures to ease strains in companies’ fund raising ahead of the fiscal year end” on March 31, said Yasuhiro Onakado, chief economist at Daiwa SB Investments Ltd. in Tokyo. “I doubt the bank would move to trim the key rate further.”

About 1.3 trillion yen in corporate bonds will come to due by the end of March, according to central bank estimates, putting pressure on businesses to find new sources of funding.

The central bank last month lowered the overnight lending rate to 0.1 percent and said it would buy commercial paper for the first time to improve funding for companies.

“Continued strains in global financial markets are driving down stock prices and raising credit costs, which are starting to effect the businesses of financial institutions,” Shirakawa said.

The bank may buy as much as 2 trillion yen ($22 billion) in commercial paper as part of its strategy to support corporate access to short-term funding, the Nikkei newspaper reported today, without saying where it obtained the information.

Additional Measures

Shirakawa last month said he’s instructed his staff to investigate additional measures to improve corporate financing and report the results to the board as soon as possible.

Central bank policy makers will also review their forecasts for economic growth and consumer inflation at next week’s meeting. In October, they said the world’s second-largest economy will expand 0.1 percent in the year ending March 31 and 0.6 percent in the following year.

The bank will be forced to cut those forecasts, said Mari Iwashita, chief market economist at Daiwa Securities SMBC in Tokyo.

The bank will publish a quarterly report on regional economies, Japan’s equivalent to the U.S. Federal Reserve’s Beige Book, at 2:30 p.m. today in Tokyo. Heads of the bank’s branches in Osaka, Nagoya, Sapporo and Fukuoka will also speak about their regions’ economies this afternoon.

To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net