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Mon, Apr 13, 2009 - Page 10 News List

Bank of Japan to bolster capital to secure currency

¥60 BILLION A sharp decline in the Japanese currency's capital adequacy ratio could hurt the government's aim to implement a package of economic stimulus measures


The Bank of Japan plans to reinforce its capital to secure the credibility of the yen and enhance its ability to implement additional economic measures, the Nikkei business daily said yesterday.

The bank aims to boost its legal reserves — part of its capital — by some ¥60 billion (US$598 million) a year by reducing the amount it pays to the state coffers, the newspaper reported.

The Japanese central bank has established a framework for buying up to ¥5 trillion in risk assets, such as corporate bonds, commercial paper and bank-held stocks, to help improve corporate financial conditions.

The central bank wants to bolster its capital because a sharp decline in its capital adequacy ratio could hamper its ability to implement such economic measures as purchasing risky assets, as well as weaken the yen’s credibility, the daily reported.

The central bank, which held its super-low interest rates steady on Tuesday at 0.1 percent, said at the time that it had decided to expand the range of assets it accepts from financial institutions in return for emergency credit, as part of its efforts to encourage lending during the economic crisis.

The central bank’s policy board is expected to agree on the planned reinforcement by the end of this month and submit it to Japanese Finance Minister Kaoru Yosano for approval early next month, the newspaper said. The finance ministry is largely expected to approve the plan, it said.

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