Japan Extends Loan Programs

Buildings are reflected on a Bank of Japan board in TokyoReuters Article

The Bank of Japan maintained its expansionary monetary policy on Tuesday and extended special loan programs to help buoy economic growth…

BOJ Governor Haruhiko Kuroda said the expansion was aimed at enhancing the transmission mechanism of quantitative easing by encouraging banks to boost lending instead of sitting on piles of cash.

Of the three [loan facilities], it doubled funds available to banks under two facilities — one that encourages banks to funnel money to industries with growth potential and another that offers cheap funds to banks that boost lending. Both give banks access to funds for four years at a fixed rate of 0.1 percent.

My opinion: I find lending facilities to be extremely interesting. Emergency lending facilities were used in the US shortly after the onset of the 2008 financial crisis but have since been dissolved. These facilities were the bearers of the bailouts and the impetus behind the Dodd-Frank Act’s “no bailouts” mantra.

The fact that Japan uses them so extensively and continues to use them today, I would imagine, is of great interest to empirical researchers in this field as data from these facilities may be readily available. As a theorist, frankly I’m excited to look into these a little more to see how they are structured as well as the transmission channels they utilize.

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