The Bank of Japan has stepped up its efforts to boost the flow of cash around the world's third-largest economy, tweaking its loan-support programme in the hope of encouraging debt-wary companies and households to overcome their aversion to borrowing.
Since the BoJ announced what it called a "new phase" of monetary easing last April, it has bought about Y7tn ($68bn) of government bonds each month, keeping downward pressure on the yen and helping inflation to tick up towards its 2 per cent target through higher costs for imported fuel.
On Tuesday, wrapping up a two-day policy meeting, the board said it would continue buying bonds at the same pace, with the aim of increasing Japan's monetary base by about Y60tn-Y70tn a year.
So far, however, this injection of liquidity has done little to galvanise lending, with deposits at domestic banks exceeding loans by a near-record margin of Y186tn ($1.8tn) last month.
To increase the incentives for banks to push out more loans, the BoJ said that it would extend two programmes that were due to expire in April, while relaxing their terms. Under the first, banks had been allowed to borrow from the BoJ amounts equivalent to their net increase in lending - a limit that will now rise to twice the net increase.
A separate programme to channel funds to high-growth investments will be doubled from Y3.5tn to Y7tn, with the maximum extended to each bank rising from Y150bn to Y1tn.
Both facilities will be at the rock-bottom rate of 0.1 per cent for up to four years.
The revamped programme should enhance the "ripple effects" of the central bank's easing, said Haruhiko Kuroda, BoJ governor, at his post-meeting press conference. "I expect it to promote more proactive actions by financial institutions and an increase in borrowing by corporations and households."
The Bank's basic policy statement was little changed from the previous month, when it said that a "moderate" recovery was under way in Japan, and that inflation was likely to plateau at 1.25 per cent until the summer.
Analysts said that implies that the BoJ may be happy to hold off from further radical easing measures until it examines the economic impact of a rise in consumption tax - the first in 17 years in Japan - which takes effect in April.
Meanwhile, some observers were sceptical that the BoJ can unlock much more demand for credit, simply by relaxing an already very loose programme.
A senior executive at the Japanese Bankers Association, the industry lobby group, said that there was no "clear mechanical linkage" between easing and loan growth.
The more important driver is the "mindset of [corporate] management," he said. "If the real actual loan demand is increasing from the corporate sector, then probably bank lending should grow. But there are still no signs of strong demand from the corporate sector."
Banks flush with cash will probably take advantage of the BoJ's special programme because it is cheaper than funding through deposits once the cost of insurance is taken into account, said Shin Tamura, an analyst covering banks at Barclays in Tokyo.
But perhaps a stronger motivation is "not upsetting the BoJ," he said. "If banks don't support 'Abenomics,' the media or the BoJ or the government may criticise them."
Still, Mr Tamura noted that the announcement seemed to improve market sentiment.
In the hours after the BoJ's decision, the yen weakened by almost 0.8 per cent against the dollar, helping the broad Topix stock index to its best one-day performance since September, closing up 2.7 per cent.
At a time when the domestic market had lost some momentum, Mr Kuroda's decision to announce the loan-support move at the February meeting rather than in March - as expected - "was particularly deft," said Izumi Devalier, Hong Kong-based economist at HSBC.
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