BOJ Warns Pandemic Could Cause Credit Crunch for More Firms
(Bloomberg) -- Tight funding conditions may spread to more sectors and to larger firms if the economic downturn triggered by the coronavirus drags on, the Bank of Japan said.
So far, the credit crunch is limited to small service businesses with limited access to funding, the BOJ said in its Financial System Report Tuesday. Problems could spread to larger firms and the manufacturing sector, it said.
“Smooth implementation of public support such as credit guarantees and interest subsidies is considered to be of vital importance,” the report said.
For now, the BOJ said issuance conditions in corporate bond and commercial paper markets have stayed mostly favorable since March, but the bank’s warning suggests it may take new steps to help businesses access credit if needed.
The BOJ last month increased purchases of corporate bonds and expanded its lending facilities, and analysts expect more action from the bank at next week’s policy meeting. Governor Haruhiko Kuroda last week said he intends to ease policy further if necessary.
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