The Bank of Japan was reluctant to purchase corporate debt as a way to help companies frozen by the global credit crunch, a summary of the BOJ Policy Board's minutes showed Thursday.
The minutes for the Nov. 20-21 Policy Board meeting backed evidence that the method the central bank employed last week was quite unorthodox and that credit conditions in the country have been deteriorating.
While holding the BOJ's main interest rate at 0.3 percent at the November meeting, the eight-member board expressed concern that firms had faced difficulty raising capital through financial markets.
They also confirmed the need to "take specific measures to facilitate corporate financing during the runup to the calendar and fiscal yearends."
But some members also stressed that "Japan's current financial conditions might not be so severe as to require the central bank to directly take on credit risk."
"Extension of credit to firms was a role of private financial institutions, and even when policy action was necessary, a central bank should act carefully," the minutes quoted many members as saying.
They added the BOJ should consider whether it really needs to go beyond one of the most orthodox policies implemented by central banks — liquidity provision into the financial system — and take an unusual policy to fight the current crisis.
On Dec. 19, however, the board made the crucial decision to purchase outright commercial paper, or short-term debt issued by companies, as a temporary policy to facilitate corporate financing.
The policy means the BOJ will directly take on firms' credit risks. BOJ Gov. Masaaki Shirakawa called the method "the most unconventional of the unconventional."