(RTTNews) - Wednesday, Bank of Japan Deputy Governor Kiyohiko Nishimura hinted that the central bank may end its corporate funding programmes on December 31, when they expire.

Recent improvements in the financial market conditions have strengthened this speculation. Speaking to business leaders in Kobe, western Japan, Nishimura said companies with higher credit ratings now find it easier to sell bonds and commercial paper. He added that the central bank will make comprehensive and appropriate decision on corporate funding measures at its next policy meeting on October 30 or later.

In December last year, the BoJ lowered its key rate to a record low of 0.1% to address the financial crisis. Also, the bank started buying the assets and offering banks unlimited loans backed by collateral to channel funds to companies.

Monday, the central bank said in its minutes for September 16 and 17 monetary policy meeting that there was a decreasing need to emphasize financial conditions as a downside risk. It had also raised its economic assessment. Last week, BoJ Governor Masaaki Shirakawa also said the corporate debt issuance conditions have improved and the need for policy to support the market is fading.

However, Nishimura said it is important to tenaciously keep financial conditions accommodative through monetary policy, suggesting that the central bank would maintain the current low level of interest rates. He added that risks remain high for the economy.

Nishimura sees some risks to the central bank’s scenario for the world economy to return to moderate growth. According to him, the world economy may slow down again if employment conditions continued to worsen, weighing on demand.

Moreover, he said if emerging economies grow faster than expected and their demand for resources increase, that could aggravate the terms of trade for developed countries and tip them into a situation like stagflation. With regard to global price development, Nishimura said it will take a long time for prices to reach desirable levels.

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

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