Tokyo (AFP)

The Bank of Japan on Friday extended by six months its exceptional mechanisms facilitating lending to companies in the face of the pandemic, and created the surprise by announcing a future financing tool intended to support the environmental investments of financial institutions.

Its business loan mechanisms put in place since spring 2020 have been extended until the end of March 2022.

The financing of Japanese private companies, in particular small and medium-sized enterprises (SMEs), "may remain under pressure because of the impact of the new coronavirus, even if (the situation, Editor's note) has improved" in recent months, the BoJ justified in a press release.

For the first time, the BoJ will also set up a financing tool intended for financial institutions for their investments or loans linked to climate projects.

This measure will succeed another financial tool whose purpose was much more vague ("Supporting the strengthening of the foundations of economic growth").

The Japanese central bank intends to detail this new device at the end of its next meeting in July, for a launch scheduled for the second half of the year.

- "Extremely large" climate impact -

"The issues around climate change can have an extremely broad impact on developments in economic activity and prices, as well as on medium and long term financial conditions," explained the BoJ.

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The institution thus considers that "supporting the efforts of the private sector" in the face of these challenges "will contribute to the stabilization" of macroeconomic conditions in the long term, which is precisely its mission as a central bank.

The unexpected move comes as debate mounts within global central banks over whether or not tackling climate change is within their mandates.

The logic set out by the BoJ matches that defended by the President of the European Central Bank (ECB) Christine Lagarde.

"We would be failing in our mandate if we did not see that climate change can degrade the transmission of our monetary policy because it is likely to induce financial instability if not taken into account," said Ms. Lagarde during a round table between central bankers in early June.

Jerome Powell, the president of the American Federal Reserve (Fed), had however estimated that the answer to the climate challenge had to come from "elected officials, who asked for and received a mandate from the voters".

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The BoJ's initiative also comes against the backdrop of a carbon neutrality objective by 2050 that Japan has set for itself in 2020. The country has also recently raised its objective of reducing CO2 emissions by 2030.

- Monetary status quo -

Unsurprisingly, on the other hand, the BoJ left its monetary policy unchanged on Friday: it will continue to apply a negative rate of 0.1% on the deposits of financial institutions with it and it has maintained its policy of unlimited buybacks. 'Japanese government bonds of keeping their ten-year yields around 0%.

Faced with still very weak inflation prospects in Japan (+ 0.1% in May over one year excluding fresh produce, according to a figure published earlier on Friday), the BoJ refined its massive asset buyback policy in March. to take it more durable.

The BoJ has since significantly reduced its buybacks of Japanese government bonds and exchange-traded index funds (ETFs), while still saying it is ready to intervene more "if necessary".

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It also extended Friday by six months, until March 2022, its buybacks of private bonds and short-term corporate debt.

The monetary institution continues to estimate that the Japanese economy, which contracted by 1% in the first quarter of 2021 compared to the previous quarter, should recover with the gradual decrease in the impact of Covid-19.

But inflation should still remain close to 0% in the coming months, she said.

© 2021 AFP