The Bank of Japan's move Tuesday to support corporate finance may stem from its concern that extremely low interest rates are not stimulating the economy amid the financial crisis.
Lower borrowing costs are usually believed to improve liquidity in the financial system and boost economic activity. However, given the global credit turmoil, banks and other financial institutions are increasingly cautious about extending fresh loans to companies for fear of defaults.
Financial conditions in Japan "seem to have become less accommodative . . . in terms of availability of funds," BOJ Gov. Masaaki Shirakawa told business leaders at a meeting in Fukuoka Prefecture on Monday. "The risk that the effects of the (BOJ's) current low interest rates may not permeate through the economy is increasing."