TOKYO The Bank of Japan, gearing up for a new leadership expected to pump cash into the economy more forcefully, has conducted a rare, nationwide campaign to promote a cheap-loan scheme for commercial banks, central bank officials said on Tuesday.
The break from tradition underscores the central bank's struggle to get banks to boost lending, which it hopes will help revive the economy, rather than invest most of their cash-on-hand in low-risk Japanese government bonds.
Central bank officials toured 10 major Japanese cities, from the snowy northernmost town of Sapporo to the western business hub of Osaka, from January 30 to February 25 to promote the scheme to regional banks and encourage them to lend more to businesses, the officials said.
"The response was good overall," said one of the BOJ officials, who was on the campaign trail. The officials declined to be identified because they are not authorised to speak to the media.
The central bank unveiled the loan scheme in October last year, offering unlimited amounts of cheap, long-term funds upon request by commercial banks. The scheme kicks off in June and the BOJ hopes to offer at least 15 trillion yen (105 billion pounds) in total by its expiry in March 2014.
How much each bank can borrow from the BOJ will depend on how quickly they ramp up lending to companies, a rule aimed at encouraging borrowing. The BOJ will lend at 0.1 percent.
The loan scheme is different from the BOJ's main monetary easing tool, an asset-buying and lending programme, under which it pumps money into the economy via asset purchases and market operations.
The BOJ has several loan programmes aimed at jump-starting the fragile economy and end nearly two decades of deflation. But it rarely conducts a nationwide tour to brief on the launch.
Under heat from Prime Minister Shinzo Abe, the BOJ delivered its fourth shot of monetary stimulus in five months in January, pledging to pump 101 trillion yen this year into the economy and make open-ended asset purchases from next year.
The BOJ is expected to continue expanding monetary stimulus under a new leadership that will take over next month, with Abe set to nominate a vocal advocate of bolder policies.
Despite abundant cash available for lending, it has yet to make its way to the broader economy because a murky economic outlook makes companies hesitant of borrow for investment.
Banks are also reluctant to take on risk by lending to up-and-starting, small firms.
Bank lending rose just 1.3 percent in January from a year earlier even as bank deposits rose an annual 3.6 percent and cash circulating in the economy grew 3.1 percent.
(Editing by Neil Fullick)