The Bank of Japan Policy Board was not unanimous in its decision to buy corporate bonds from financial institutions to help them weather the global credit crunch, the minutes of its January meeting show.
Although one of the board’s eight members opposed the emergency plan as “premature,” but the central bank went ahead with it Thursday after attaching conditions.
According to the minutes, released Tuesday, several board members at the Jan. 21-22 meeting backed the bond-buying plan because “the functioning of the corporate bond market had declined significantly,” preventing all but a limited number of companies from tapping capital markets for needed funds, the minutes said.
However, board member Miyako Suda opposed the move, saying it was “premature” for outright CB purchases.
The BOJ’s conditions restrict its purchases to bonds with a residual maturity of up to one year.
Suda said the condition would only serve to limit the impact of the policy, the minutes show. She also said the malfunctioning of the bond market “had not led to overall tightness in corporate financing” because companies can obtain “alternative funding” by issuing commercial paper, a type of short-term debt commonly used to handle financing needs, and bank loans.
Earlier, the BOJ said it would support corporate financing through another emergency plan involving outright purchases of CP from commercial banks and other financial institutions.
A Finance Ministry official attending the meeting “welcomed” the BOJ’s efforts to fight the crisis.
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