By Jason Clenfield and Toru Fujioka
Feb. 6 (Bloomberg) -- Bank of Japan Governor Masaaki Shirakawa said the central bank will limit its purchases of stocks and corporate debt to protect its balance sheet and the credibility of the yen.
“We are mindful of the need to eventually end the purchases” as they are “extraordinary measures,” Shirakawa told lawmakers in Tokyo today. Excessive buying would worsen the central bank’s balance sheet and “have a clear impact on the yen’s credibility,” he said.
Shirakawa said the central bank decided to buy shares owned by banks this week because declining values of stock holdings is the biggest risk facing the country’s lenders. Buying the assets will bolster bank capital and encourage lending to companies facing a credit shortage, he said.
“The outlook for the economy is severe,” Shirakawa said. “Exports slowed very sharply in the fourth quarter and credit markets have tightened.”
The central bank this week said it will buy 1 trillion yen ($11 billion) of shares owned by financial institutions until 2010 to shore up their capital, which has been ravaged by the global stock-market rout. It’s also buying up to 3 trillion yen of commercial paper and considering purchasing corporate bonds to channel funds to companies.
To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
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