Bank of Japan to boost the economy by massive loan scheme by Zuzana Zelenakova

In an attempt “to rid Japan's economy of deflation and achieve sustainable growth with price stability" Bank of Japan announced its plans to offer about 33 billion dollar in a temporary low-interest loan scheme. As the bank said the measure "aims to act as a catalyst for financial institutions in making efforts toward strengthening the foundations for economic growth." The bank kept its lending rates low at 0.10 percent Tuesday as it announced the details of the loan scheme first voiced in May. The pressure on the central bank of Japan based in Tokyo has been rising for quite some time as the government put its main focus on restoring the country´s disrupted eco! nomy and cutting massive public debt, which currently represents about 200 percent of gross domestic product. The main idea of the loan schemed is to make low interest funds available to private banks and, subsequently, these will lend to companies. "It's a drastic step for the bank," says economist at Dawa Institute of Research Maiko Noguchi. "There are only a limited number of companies banks are willing to lend money to. And such companies have enough funds at hand thanks to growing exports. It's unclear if the scheme will work." The bank announced that it would start providing funds by the end of August and would primarily focus on sectors such as healthcare, tourism and environment. "It's questionable whether it is appropriate for the central bank to offer lending to 'growth sectors' and outdated to think that the government or the public sector can predict which sectors they are," said economist at NLI Research Institute Taro Saito. Japan has been struggling with the ! phenomenon of deflation for the past two decades, mainly due t! o low un employment rate that Japan had been maintaining and low GDP growth rate at the same time. The combination of these two caused the annual household income decrease gradually.

related story (sgx17597): http://www.france24.com/en/20100615-bank-japan-unveils-33-bi...

by Zuzana Zelenakova for Cantell TV (http://cantell.tv)

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