The Japanese government is preparing a loan program to aid companies operating in Thailand as the worst flooding in 50 years forces Toyota Motor Corp and Nissan Motor Co to shut factories.
Loans would be backed by Japanese government bonds and the Bank of Japan (BOJ) would be involved in disbursing the Thai baht funds in the event of cash shortages, Tsutomu Okubo, a lawmaker and deputy policy chief for the ruling Democratic Party of Japan said in an interview in Tokyo on Monday.
The BOJ said yesterday it is working with Thailand’s central bank to arrange the program.
Moody’s Investors Service said the flooding in Thailand is credit negative for Japanese automakers as producers including Toyota, Nissan and Honda Motor Co lose output of 6,000 vehicles a day. The disaster may weigh on Japan’s recovery from the March earthquake as it also grapples with the global slowdown and a yen trading near a postwar high.
“I’m concerned about the impact of the heavy flooding,” said Yoshimasa Maruyama, a chief economist at Itochu Corp in Tokyo.
“This could have a significant impact as it forces factories to shut for a prolonged period,” he said.
Under the plan, Japanese banks would borrow baht from Thailand’s central bank and lend to Japanese companies operating in the country, Okubo said.
The banks would provide bonds as collateral for the baht funds, he said. Details of the program are being finalized, the BOJ said in statement.
State-run lender Japan Bank for International Cooperation is also planning to back loans to the nation’s companies operating in Thailand, Japanese Chief Cabinet Secretary Osamu Fujimura said at a press conference in Tokyo yesterday.
The loans will help enhance the stability of Thailand’s financial markets, Bank of Thailand Governor Prasarn Trairatvorakul said yesterday.
“One aim of this measure is to facilitate the funding of financial institutions operating in Thailand, including Japanese banks, which provide financial services to firms, including Japanese firms operating in the flood-affected areas of Thailand,” Prasarn said in an e-mailed statement.
Details of the arrangement were not disclosed in the statement.
Companies, including Toyota, are facing the worst supply-chain disruptions since the record earthquake that struck Japan. Thailand makes about a quarter of the world’s hard-disk drives and serves as a production hub for Japanese carmakers and electronics firms.
“The rising flood waters have hurt all Japanese auto manufacturers and many electronics firms, either directly at flooded plants or via affected parts suppliers,” Moody’s said in its Weekly Credit Outlook.
The floods will cost Thailand 2 percent of its GDP this year, it said.
The damage caused by the floods cost as much as 120 billion baht (US$3.9 billion), Trairatvorakul said on Oct. 14.
Toyota said it is extending a production halt at its three plants in Thailand until Friday following disruptions in the supply of parts.
Nissan has said it is extending plant closures through that date.
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