TOKYO (MNI) – Japanese Finance Minister Jun Azumi said on Tuesday
that the Ministry of Finance will extend until end-March 2013 the
government’s emergency facility aimed at easing the drag from the yen’s
rise and take advantage of the currency’s purchasing power.
Azumi told a regular briefing that demand for the facility has been
rising in recent months, and that Japan must closely monitor whether the
yen’s strength will increase downside risks to its economic recovery.
The temporary facility was launched in August 2011 at $100 billion
and two months later was raised to Y10 trillion (about $125 billion)
from Y8 trillion (about $100 billion). It was originally scheduled to
be terminated this month.
The program is designed to help Japanese firms conduct mergers and
acquisitions and seek energy and other resources overseas.
Under the program, Japan’s key lending agency will make dollar
loans to, or make yen investments in, Japanese firms to cover part of
their needs to purchase overseas assets.
Those firms have to turn some yen funds into dollars or other
currencies in order to fully finance the purchases, which in theory
would add selling pressure on the Japanese currency in the forex market.
The government is taking dollar funds from its foreign exchange
special account and lending them to the Japan Bank for International
Cooperation.
The JBIC then extends loans to commercial banks, which will then
lend companies that need funds for mergers and acquisitions, for
example. The former export-import bank is also investing in projects.
The facility can also help promote the creation of a new industry,
secure energy supply sources overseas and support small businesses, as
the appreciation of the yen threatens to erode exporter profits while
boosting the yen’s purchasing power in international markets.
Another MOF official told reporters that the outstanding balance of
the JBIC’s loans is expected to total Y1.34 trillion at the end of
September.
tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **
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