Bank of Japan to offer banks zero interest loans to help companies cope with climate change

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By Megumi Fujikawa

TOKYO. On Friday, the Bank of Japan said it will provide zero-interest loans to commercial banks to help companies finance climate change mitigation projects.

The move by the Bank of Japan is fueling the global debate over whether central banks should expand their mandate beyond their traditional goal of price stability. The central bank of Japan has said that climate change needs to be addressed due to its significant economic and financial implications.

The European Central Bank has said it will support efforts to combat climate change, including through its bond buying programs. Meanwhile, Federal Reserve Chairman Jerome Powell said climate change is not something that the central bank directly takes into account when setting monetary policy, although he said it could be a risk falling under the Fed’s existing banking and finance mandates. stability.

The central bank of Japan has said it will offer interest-free loans to private sector lenders so that these banks can use the money to support companies making investments related to climate change.

The Bank of Japan said eligible investments or loans include green loans, green bonds, loans tied to resilience, and bonds with targets related to efforts to combat climate change.

Banks that lend using the new facility will be exempted from the negative interest rate currently charged on some of their deposits with the central bank.

Also on Friday, the Bank of Japan cut its growth forecast for the year ending March 2022.

In its quarterly forecast, the bank’s council forecast that Japan’s economy will grow 3.8% for the current fiscal year, up from its previous forecast of 4.0% published in April. He said he expects 2.7% growth for the year ending March 2023, up from the previous 2.4% growth forecast.

The bank’s board also said it expects core consumer prices (excluding fresh food) to rise 0.6% per year ending in March 2022. That’s below the bank’s long-standing inflation target of 2%, but higher than its previous forecast of 0.1%. climb.

The central bank has kept its target for short-term interest rates at minus 0.1%, and the target for the yield on Japan’s 10-year government bonds is near zero.

Email Megumi Fujikawa at megumi.fujikawa@wsj.com



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