The central bank said it would double the scale of the Fund-Provisioning Measure to Stimulate Bank Lending and the Fund-Provisioning Measure to Support Strengthening the Foundations for Economic Growth and it will extend the application period for these facilities by one year.
Specifically, under the Stimulating Bank Lending Facility, financial institutions will be able to borrow funds from the Bank up to an amount that is twice as much as the net increase in their lending. As for the Growth-Supporting Funding Facility, the maximum amount of the Bank's fund-provisioning under the main rules will be doubled from 3.5 trillion yen to 7 trillion yen.
Under these facilities, financial institutions will be able to borrow funds at a fixed rate of 0.1 percent per annum for 4 years instead of 1-3 years at present. The Bank expects that these enhancements will further promote financial institutions' actions as well as stimulate firms' and households' demand for credit, with a view to encouraging banks' lending and strengthening the foundations for economic growth.
With regard to the outlook, Japan's economy is expected to continue a moderate recovery as a trend, while it will be affected by the front-loaded increase and subsequent decline in demand prior to and after the consumption tax hike. The year-on-year rate of increase in the CPI, excluding the direct effects of the consumption tax hike, is likely to be around 1¼ percent for some time.
Risks to the outlook include developments in the emerging and commodity-exporting economies, the prospects for the European debt problem, and the pace of recovery in the U.S. economy.