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Bank of Japan policymakers, concerned about a serious deterioration in corporate and household sentiment after the March 11 earthquake and tsunami, decided on a step to ease monetary conditions, minutes released by the central bank showed Tuesday.

The nine-member Policy Board agreed that “Japan’s economic activity could be adversely affected through possible deterioration in the sentiment of firms and households,” the minutes of its March 14 meeting said.

The board voted to double the BOJ’s asset purchase fund to \10 trillion, mainly to support fundraising by companies, with one member opposing the move.

Miyako Suda, whose stint expired at the end of last month, said in the meeting that the increase in asset purchases should be limited to such risk assets as corporate debt, and that government bonds should not be included, the minutes said.

If the BOJ raises the amount of sovereign debt it purchases at a time when longer-term interest rates are on a declining trend, it could trigger suspicion that the central bank is financing the state budget, warned the member, widely believed to be Suda, according to the minutes.

Lending off 2%

Lending by domestic banks in fiscal 2010 dropped 2.0 percent from the previous year for the first decline in five years as companies were reluctant to borrow money for fresh capital spending amid the cautious outlook for the economy, the Bank of Japan said Tuesday.

The average daily balance of commercial banks’ lending came to \394.41 trillion for the year through last month. Loans extended by large city banks with nationwide branch networks, including the three mega-banking groups, fell 4.2 percent, while those by regional banks rose 0.4 percent on growth in housing loans for individuals.

In March alone, overall lending shrank 1.8 percent from a year earlier for the 16th consecutive month of declines. The city banks marked a 4.6 percent drop and the regional lenders registered a 1.1 percent expansion.

The BOJ denied any major shift in the trend of the country’s bank lending because of the Tohoku disaster, but added the central bank has found in its soundings that demand for operating money from businesses rose to some extent in the affected areas.

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