Tokyo, April 8 (Bloomberg) -- Japan's central bank said it would consider buying asset-backed securities from banks -- a move it called ``unprecedented'' -- as it seeks to help companies raise money and sustain a recovery from recession. The bank also said it would keep monthly purchases of government bonds from banks -- its main policy tool since cutting rates to zero in March 2001 -- unchanged at 1.2 trillion yen ($10 billion). ``Outright purchase of private debt is an unprecedented measure for a central bank,'' the Bank of Japan said in a statement after policy makers met.
Buying asset-backed securities, which include asset-backed commercial paper, would be a sign that Governor Toshihiko Fukui, who took office on March 20, is willing to move beyond purchases of government bonds to pull Japan out of a 12-year slump. The purchases would increase the flow of money to companies by encouraging them to raise cash through sales of assets such as bills due from other companies. ``This may signal just the first step in Fukui's attempt to diversify the central bank's policy,'' said Yasuo Goto, a former policy board member and a senior economist at Mitsubishi Research Institute. The move -- which the bank said would be a ``temporary measure'' -- would be a departure from the policies of Fukui's predecessor, Masaru Hayami, who resisted political pressure to buy assets other than government bonds. Fukui has said he may consider other steps Hayami rejected, including setting a target for an increase in prices to end five years of deflation.
Reserve Target
In December, the central bank started accepting asset-backed commercial paper, which has maturities of up to six months, from commercial banks as collateral for loans. Buying the securities outright would boost demand, driving up prices and encouraging more companies to raise cash. That would make more money available to companies at lower cost. Central bank purchases of asset-backed commercial paper might help stimulate a market that economists estimate at the equivalent of $42 billion -- less than a 10th of the $704 billion market in the U.S. That would help uncork the bottleneck that keeps cash that's flooding Japan's banking system from flowing to companies that need it to buy more equipment, analysts said. Still, more will be needed to bring the economy back to health, they said.
The purchases would ``probably help investor confidence, but the step will have little impact to support the economy,'' said Mamoru Yamazaki, chief economist at Barclays Capital Japan Ltd. The central bank also said it would keep the target for reserves it makes available to lenders unchanged at between 17 trillion yen and 22 trillion yen. A majority of board members voted to keep monetary policy unchanged, the central bank said in a statement. Fukui will speak at a press conference at 2:15 in Tokyo. Fukui is scheduled to meet Prime Minister Junichiro Koizumi, Finance Minister Masajuro Shiokawa and other economic ministers tonight to discuss the economy. //www.bloomberg.com/