By Mayumi Otsuma
July 22 (Bloomberg) -- Bank of Japan Deputy Governor Hirohide Yamaguchi said the central bank will end its unprecedented credit programs in a way that is least disruptive to investors.
“The bank will, without any predetermined view, carefully assess developments in corporate financing and financial markets,” Yamaguchi said in a speech today in Hakodate, northern Japan. “It is important to plan an exit in a way that market participants can anticipate and not bring about unnecessary market disturbances.”
The central bank last week decided to extend the credit- support programs of buying corporate debt from banks and providing them with unlimited loans to Dec. 31 from Sept. 30, citing “severe” borrowing conditions amid the worst postwar recession. Governor Masaaki Shirakawa said on July 15 that keeping the “extraordinary” measures for too long could distort credit markets.
We “will decide, at an appropriate timing, whether the support offered by the current measures is still necessary,” Yamaguchi said.
Since lowering the overnight lending rate to 0.1 percent in December, the central bank began buying commercial paper and corporate bonds from lenders. It has also offered to lend to commercial banks limitlessly in exchange for approved collateral.
The programs were initially slated to expire in March, and the board first extended them for six months to September. Economists anticipated a further half-year extension last week.
Shirakawa last week said the bank chose the shorter duration because conditions for corporate borrowing are getting better and the bank wants to watch whether improvement will continue.
To contact the reporter on this story: Mayumi Otsuma in Hakodate or at motsuma@bloomberg.net
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