December 13, 2016 / 10:28 AM / 9 months ago

Bank of Japan to extend lending facilities expiring in March: sources

TOKYO (Reuters) - The Bank of Japan is expected to extend the deadline for its loan programs aimed at boosting lending to industries with growth potential, sources said, bolstering government efforts to lift the country from decades of weak growth.

The central bank’s nine-member board will make the decision either at its rate review next week or a subsequent policy meeting in January, sources familiar with its thinking told Reuters.

The BOJ has three cheap loan schemes for financial institutions - one aimed at boosting bank lending to industries with growth potential, another for banks operating in quake-hit areas, and a program under which it offers four-year loans at zero interest for banks that increase overall lending.

The central bank is set to extend the March 2017 deadline for these programs given solid demand from financial institutions, the sources said.

“The programs are well-received by banks, so there’s not much reason to discontinue them,” said one of the sources on condition of anonymity.

The BOJ has extended the deadlines for these programs several times, usually by about a year, to prompt risk-shy financial institutions to shift money out of safe-haven government bonds into lending.

The schemes are separate from the BOJ’s main asset-buying program dubbed “quantitative and qualitative easing” (QQE), under which it pumps money into the economy via purchases of government bonds and risky assets.

To encourage banks to use the lending programs, the BOJ exempts funds procured from the schemes from a 0.1 percent negative interest it charges to excess reserves financial institutions park with the central bank.

Japanese bank lending remains weak despite the BOJ’s massive money printing as companies are reluctant to borrow for investment on uncertainty over the business outlook.

One of the key objectives of premier Shinzo Abe’s “Abenomics” stimulus policies is to boost Japan’s growth potential with reforms so that companies increase spending on prospects of a stronger economy.

Reporting by Leika Kihara; Editing by Jacqueline Wong

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