Bank of Japan has decided to lend JPY3 trillion to private banks, to support private financial institutions' efforts in strengthening the foundations for economic growth while ensuring smooth money market operations.

Bank of Japan said that the loans will be provided in the form of electronic lending. Because the measure is judged to be particularly necessary, the duration of loans to financial institutions will be set as within one year, pursuant to the stipulations in the statement of operation procedures.

Each participating bank can borrow a maximum of JPY150bn of one-year funds at a fixed-rate of 0.1%. The banks can roll over the funds a maximum of three times.

Bank of Japan has asked the banks to lend out all the funds to companies that have high growth potential in 18 different sectors.

Borrowers or entities in which financial institutions invest shall be either domestic residents (excluding the government, municipal governments, institutions holding a current account at the bank, and financial institutions without a current account at the bank) or foreign corporations with a business establishment in Japan and carrying out business in the areas identified as contributing to strengthening the foundations for economic growth in Japan.

Bank of Japan said: “As for financial institutions that utilize the measure, the bank expects that they will utilize the fund-provision measure appropriately and effectively, taking it as an opportunity to expand lending and investment to businesses that will contribute to raising productivity or creating new demand.”