By Mayumi Otsuma
Feb. 19 (Bloomberg) -- The Bank of Japan said it will buy 1 trillion yen ($10.7 billion) in corporate bonds from financial institutions and extend lending programs to prevent a shortage of credit from deepening the recession.
Governor Masaaki Shirakawa and his colleagues said the bank will start buying bonds rated at least A from March 4 until Sept. 30, the central bank said in a statement in Tokyo today. The bank kept the overnight lending rate at 0.1 percent by a unanimous vote.
The recession is making it difficult for companies to raise finance by selling debt or shares, and banks are struggling to meet an increase in demand for loans. The cost to protect Japanese corporate debt against default soared to a record this week on concern bankruptcies will increase after the economy shrank last quarter by the most since the 1974 oil shock.
“So far the scale of asset purchases has been fairly modest, but at least a framework has been established that could be developed into a more ambitious program,” said Julian Jessop, chief international economist at Capital Economics Ltd. in London.
Earlier this week, the bank said it will resume buying stocks owned by lenders on Feb. 23, a step it implemented between 2002 and 2004, to help them replenish capital and lend more.
Shirakawa will speak to the press at 3:30 p.m. in Tokyo.
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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