(RTTNews) - Tuesday, the Bank of Japan announced new money market operation measures to facilitate corporate financing in the wake of the global financial market turmoil creating funding problems for companies.

After keeping its interest rates unchanged at 0.3% in an unscheduled monetary policy meeting, the central bank said it will ease the criteria on credit ratings from “A-rated or higher” to “BBB-rated or higher.” This action will become effective on December 9.

The central bank governor Masaaki Shirakawa said Monday that availability of funds is deteriorating at an accelerating pace, reflecting the turmoil.

In view of facilitating corporate financing during the run-up to the calendar and fiscal year-end, the BoJ said it would accept a wider range of corporate debt as eligible collateral, effective through April 30, 2009.

Further, the bank will introduce a new operation that provides funds over the fiscal year-end at an interest rate equivalent to the target for the uncollateralized overnight call rate to enhance flexibility in funds-supplying operations collateralized by corporate debt. This new operation will be conducted for an unlimited amount against the value of corporate debt pledged as the standing pool of eligible collateral.

The principal terms and conditions for the new operation will be decided at the Monetary Policy Meeting to be held on December 18 and 19, and necessary arrangements will be made for the implementation of the operation in January 2009.

Shirakawa had said economic activity in Japan has become increasingly sluggish in the wake of the slowdown in overseas economies, reducing demand for Japan’s exports. He said the increased sluggishness in economic activity is likely to persist for the next several quarters.

The governor noted that the timing of the recovery in the growth rate of overseas economies as a whole is highly uncertain. But given the current severe situation, it seems appropriate to assume that the growth rate of overseas economies taken as a whole is likely to show a clear recovery only after the middle of 2009.

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Posted in Categories: Economy, Forex, Japan, Releases, USA.

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