Yale School of Management

Program on Financial Stability

Improving our understanding and management of systemic risk.

Japan Introduces Measures to Facilitate Corporate Financing

March 21, 2020
: By: Manuel Leon Hoyos

Access our live “financial-intervention” tracker, which is a single point-of-entry on the YPFS website to keep up with financial-crisis fighting interventions by central banks, fiscal authorities, and international organizations  here.

On March 16, the Bank of Japan (BoJ) introduced a package of emergency measures to facilitate corporate financing.

Through the new Special Funds-Supplying Operations, the BoJ will lend up to 8 trillion yen ($72 billion) against corporate debt at a 0% interest rate, with maturities up to one year. The terms and conditions can be found here.

The BoJ also increased its limit on Outright Purchases of Commercial Paper and Corporate Bonds to 2 trillion yen ($18 billion approximately). This is a standing facility the BoJ has used for many years to conduct its monetary policy. Eligible counterparties must have a current account at the BoJ and be deemed sufficiently creditworthy. The mechanism requires counterparties to bid in competitive auctions the yield at which they desire to sell commercial paper or corporate bonds. The updated overall limits and schedules can be found here, and terms and conditions here.

During the 2007-2009 global financial crises (GFC), the BoJ introduced both the Special Funds-Supplying Operations and Outright Purchases of Commercial Paper. Both of these programs had intended to facilitate corporate financing and were thought to have contributed to lowering interest rates in the commercial paper market.

Click here to read a YPFS case study on the BoJ Outright Purchase of Commercial Paper and here for the Special Funds-Supplying Operations during the GFC. These cases provide details of the program and access to key documents.

See:  The YPFS Live Financial Intervention Tracker.

Japan Market Liquidity