The Bank of Japan’s Policy Board today announced that it will provide subordinated loans to struggling Japanese banks.
The central bank has brought in the measures to help prop up hard hit financial institutions by bolstering their capital bases in conjunction with planned capital raising measures by the institutions themselves.
“If the strains in financial markets at home and abroad further intensify and financial institutions become more conscious of capital constraints due to concern over a future decline in stock prices, there is a possibility that the financial intermediation function will not be carried out smoothly,” the bank said in a statement.
“In addition, together with the effects stemming from the domestic economic downturn, the capital strength of financial institutions might be weakened and the stability of Japan’s financial system might be affected.”
The total amount of loans available is capped at ¥1 trillion (£7.2 billion).