Spare a yen

17 March 2020 By Pete Sweeney Follow @petesweeneypro

The central bank will loan to banks at 0%, accepting corporate debt as collateral. The hope is that companies, propped up by cheap credit, will refrain from layoffs as growth contracts. The risk is that, true to form, they take the money and do little that helps.

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The Bank of Japan at an emergency meeting on March 16 pledged to provide more liquidity and buy exchange-traded funds and real estate investment trusts more aggressively in response to the fallout from the coronavirus pandemic. It held off on cutting already negative interest rates.

The BOJ said it will provide loans to banks at 0% and that it will accept corporate sector debt as collateral, through a programme that will run until end-September.

"I don't think we have reached a limit on how deep we can cut interest rates,” said BOJ Governor Haruhiko Kuroda at a news conference. “If necessary, we can deepen negative rates further. But what's necessary now is to ensure small and midsize firms have ample funding, and to restore market stability.”

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