The Bank of Japan said Tuesday it will maintain its zero interest rate policy while enhancing its loan scheme for prospective growth industries to ¥5.5 trillion, up from ¥3.5 trillion.
The BOJ also said it will extend the deadline for applications for the program, referred to as the Growth-Supporting Funding Facility, by two years until March 2014 in an effort to boost the sluggish economy and bring deflation to a halt.
The economy “confronts the long-term structural challenge of declining-trend growth rates amid rapid population aging,” the central bank said in a statement after a two-day meeting of its Policy Board.
Overcoming such difficulties can be achieved through strengthening growth potential and added support from the financial side, the BOJ said.
The bank is “ready to use all possible means” to support the prospective growth industries, BOJ Gov. Masaaki Shirakawa told reporters after the Policy Board meeting.
The decision to enhance its funding facility to ¥5.5 trillion will in effect make it easier for banks to support funding the prospective growth industries.
The BOJ also said it will expand its support for financial institutions in disaster-hit areas by extending the deadline to apply for special loans by a year to April 2013.
On Tohoku’s recovery one year on since the disasters of last March, Shirakawa said reconstruction and economic revival are proceeding at an unequal pace.
“The BOJ is determined to support the devastated areas as much as it can” through monetary policies in order to contribute to the local economy, he said.
The ultralow interest rate, maintained by a unanimous vote, will leave the key short-term interest rate at zero to 0.1 percent. The board meeting also agreed to leave unchanged the central bank’s credit and asset-purchasing program at ¥65 trillion, although board member Ryuzo Miyao proposed expanding the program by ¥5 trillion.
The decisions Tuesday followed the BOJ’s surprise move last month to step up monetary easing measures by breaking with precedent to announce an explicit consumer price inflation target of 1 percent. The BOJ also added ¥10 trillion into its asset purchase program following last month’s Policy Board meeting.
On the economic outlook, the BOJ said Tuesday that overseas economies “still have not emerged from a deceleration phase on the whole,” but signs of improvement have been observed in both the U.S. and European economies.
Japan’s economic activity “has remained more or less flat, although it has shown some signs of picking up,” the BOJ said.