Thursday, January 08, 2009

Japanese Government Lending $13 Billion to the Banks to Keep Economic Crisis under Control

Japan is the richest country in Asia, but the Asia’s biggest economy has not gone untouched by the ongoing economic slump. Japan government is now lending 13 billion dollars to the banks and other financial companies in order to ease the credit flow in the country. Providing 1.225 trillion yen (13.2 billion dollars) to the banks, Japan is trying to ensure that the banks will have enough money so that they can continue lending money to various companies and organizations amidst economic downturn. Recently, Japanese banks have been pretty strict in lending money due to the current economic recession, even though Japanese economy has not been hit severely by the credit crunch yet.

The News reported:

"The central bank will continue providing capital proactively to the market to ensure the stable management of small- and mid-size companies," Bank of Japan governor Masaaki Shirakawa said in parliament.

The BoJ has little room to reduce its rock-bottom interest rates further so it is seeking alternative tools to repair credit markets that have been battered by the global financial crisis.

The BoJ has pledged to supply an unlimited amount of funds against eligible collateral at an interest rate of just 0.1 percent.
On December 19, it slashed its key rate to just 0.1 percent to cope with the worsening global slowdown……….

It is good to see that BoJ is taking several attempts to prevent against the current global economic downturn which has reached at its peak since 1930’s Great Depression. There is no sing of hope that this economic crisis will decrease in the near future. So, it is a good move by Japanese government that they are trying to keep the credit flow intact in the country. However, the question is that for how long the problem will remain under control by this artificial measure.