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Japan's First Post Earthquake Stimulus Is Here In The Form Of A Tiny 500 Billion Yen Loan Program

Tyler Durden's picture




 

The BOJ just concluded its two-day operation, and while not announcing any new monetary program or changing its interest rate, both of which had been widely anticipated, it did announce a new Y500 billion loan program for "growth industries" the result of which is some substantial strength in overnight equity markets. Alas, just like everything else by BOJ terms, this stimulus will prove largely insufficient, and will be followed by yet another loan program, until finally Shirakawa relents and restarts the printers.  And in other ridiculous news, the BOJ raised its outlook of the second half, saying the economy was "picking up." There is no point in even commenting on this, suffice to say that instead of engaging in what it does best, i.e., monetary stimulus, Japan, and of course the US, will now be delighted to live in bizarro world that things will improve on their own. Best of luck with that.

Reuters recaps the key terms of the new loan program:

The Bank of Japan expanded a loan scheme for growth industries on Tuesday by setting up a new credit line targeting asset-based lending, in an effort to battle chronic ills that have been plaguing the economy since long before it was hit by the March 11 earthquake.

As widely expected, the central bank held off on easing monetary policy further and kept its benchmark interest rate at a range of zero to 0.1 percent by a unanimous vote.

Below are details of the new step:

  • The BOJ will lend up to 500 billion yen ($6.23 billion) to commercial banks that make equity investments and extend asset-based lending, or loans without real estate collateral or guarantees.
  • It will allow each bank to borrow up to 50 billion yen at 0.1 percent interest for up to four years. The lending cap is set separately from the 150 billion yen ceiling for the existing 3 trillion yen loan scheme for growth industries.
  • It will allow commercial banks to borrow within the outstanding amount of eligible equity investments and loans including asset-based lending made from April 2010. The minimum amount of loans that the banks can make to their clients will be 1
  • million yen, compared with 10 million yen in the existing scheme.
    It will accept applications for the loans until March 31, 2012, keeping the deadline unchanged from the main loan scheme.

Summarizing the other (lack of) actions by the BOJ:

As widely expected, the central bank held off on easing monetary policy further and kept its benchmark interest rate at a range of zero to 0.1 percent by a unanimous vote.

The BOJ decided to create a 500 billion yen ($6.23 billion)new credit line for banks that extend asset-based lending. This will be part of the BOJ's loan scheme targeting growth industries but loans will be offered separately. Each bank can borrow up to 50 billion yen at 0.1 percent interest for up to four years.

The central bank slightly upgraded its assessment of the economy, saying it continues to face downward pressure but is showing some signs of picking up.

Governor Masaaki Shirakawa will hold an embargoed news conference with his comments expected to come out sometime after 4:15 p.m

And market commentary:

DAISUKE KARAKAMA, MARKET ECONOMIST AT MIZUHO CORPORATE BANK, TOKYO

"Unless we see some drastic moves, I don't think BOJ decisions can
heavily impact the forex market as Japan's monetary policy is already
super-loose.

"The yen has lost ground a bit but going into
European time, I would be surprised to see it under more pressure only
on this news."

YASUO YAMAMOTO, SENIOR ECONOMIST, MIZUHO RESEARCH INSTITUTE, TOKYO

"The BOJ's upgrade of its economic view is due largely to a faster
recovery in supply chain problems. The BOJ is expected to keep its
policy rate unchanged for a while as the economy is recovering in line
with its scenario, or even at a faster pace than previously expected.

"But whether the BOJ increases its asset buying scheme depends on
financial markets. Although the economy is rebounding from falls seen
right after the disaster, volatile market moves could prompt the central
bank to expand the scheme.

"The BOJ's loan scheme is expected to support small- to medium-sized corporations such as venture businesses."

MASAMICHI ADACHI, SENIOR ECONOMIST, JPMORGAN SECURITIES JAPAN

"The BOJ will wait to see future economic developments before taking
more action. It is not sitting idly by but focusing on downside economic
risks. The BOJ is also sending a message to the public that it is doing
its part to enhance growth and beat deflation by boosting loans for
growth sectors.

"The BOJ remains ready to loosen policy by
expanding its asset-buying scheme if risks to the economic become
evident, but it is unlikely to ease policy further at least near term.

"As supply-side constraints resolve, the Japanese economy will recover
more quickly than world economy later this year, and this will lead the
BOJ to shift its focus away from downside risks in the coming months.

"If the global economy falters due to factors such as a spike in oil
prices, Europe sovereign risks, or a slack recovery in the U.S. jobs
market, that might prompt a BOJ easing, but chance of this happening is
rather small."

TETSU AIKAWA, DEPUTY GENERAL MANAGER OF CAPITAL MARKETS AT SHINSEI BANK, TOKYO

"We already have a 3 trillion yen asset-purchasing scheme, so the
amount for the new asset-based lending plan looks small. That's why swap
rates are rising a little right now.

"The truth is there are
more reasons to be concerned about the outlook than to be optimistic.
Reconstruction demand isn't coming as soon as many people were
expecting, which we saw in weak machinery orders data.

"Some people were looking for yields to start rising toward the end of the year, but this could come later rather than sooner.

 

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Tue, 06/14/2011 - 01:03 | 1366931 plocequ1
plocequ1's picture

Its all good. Futures are up. Good night and happy trading. To quote Robo, " LOL"

Tue, 06/14/2011 - 01:22 | 1366965 waylon153
waylon153's picture

How long has Japan had its interest rate at 0% to spur lending and "growth"?

 

How long will the Fed keep rates at 0% to spur lending and "growth"?

Tue, 06/14/2011 - 09:31 | 1367408 kaiserhoff
kaiserhoff's picture

1. 22 years and counting.

2. To the Moon, Alice!

Tue, 06/14/2011 - 01:25 | 1366971 chump666
chump666's picture

Asia is an economic joke, I mean you would (later) be wiser to invest there. But meantime, f*cking jerkoff.  Both China and Japan are the BIGGEST conjobs, fudging numbers, lying, manipulating FX list goes on and on...funny how the stock markets indicate how crap they are

Tue, 06/14/2011 - 01:46 | 1366985 arnoldsimage
arnoldsimage's picture

bank of japan says the economy is picking up? wait for it... hahahahahahahahahahahahahahahahahahahahahahahaha. and i thought monty python was funny.

Tue, 06/14/2011 - 01:58 | 1366992 Global Hunter
Global Hunter's picture

Winning post, stunning and funny at the same time. 

Tue, 06/14/2011 - 02:20 | 1367016 MobBarley
MobBarley's picture

The geiger counter business is booming, dosimeters are flying off the shelves,

iodine pills are the new uber fashion fad, shit is looking great for the economy in Japan.

 Countries all over the world are clamoring for the newly discovered health and

evelotionary benefits of heavily radioactively augmented electronics, cars, and wasabi.

 Japan will lead the world in genetic advancements, you can bet on it.

 

Tue, 06/14/2011 - 07:25 | 1367202 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Japan is an aging country. The radiation will decrease the overall aging rate. Yep, really great. /sarcasm

Tue, 06/14/2011 - 02:32 | 1367022 chump666
chump666's picture

At least India are (somewhat) honest with the inflation blowout...china, jeez it imports oil and downgrades it's inflation destruction = major stagflation brewing.  They're gone...

Tue, 06/14/2011 - 02:38 | 1367026 Yen Cross
Yen Cross's picture

  Do DA Math @ usd/jpy  current  80.286.

Tue, 06/14/2011 - 04:41 | 1367110 jkruffin
jkruffin's picture

Time to go long USD/JPY for the run to 84.......it's time!

Tue, 06/14/2011 - 04:52 | 1367127 A Man without Q...
A Man without Qualities's picture

It may well be that the industries most affected by the tsunami, such as open water fishing, off shore sea farms, low lying farm land, have been so severely damaged that it would cost too much money and take too many man hours to fix.  The fact that so few of the next generation are going to enter these professions may be a significant factor...

These is nothing like the Kobe quake in this respect.

Let's not discount the real fear that massive money printing will be a further blow to the older generation who rely on the stable purchasing power of JGBs.

Tue, 06/14/2011 - 05:44 | 1367150 Out9922
Out9922's picture

They can't win doing that.  Go Big or Go Home.  Long live the Bernank!

Tue, 06/14/2011 - 06:11 | 1367166 centurain
centurain's picture

Long time reader, first time posting and this song runs through my head every time I come here.

http://www.youtube.com/watch?v=DohRa9lsx0Q

Tue, 06/14/2011 - 06:29 | 1367176 writingsonthewall
writingsonthewall's picture

Once upon a time 500 Billion yen was a lot of money.

My how the conseuqences of QE can be seen and how money printing doesn't resolve your problems.

Japan has been 'defaulting' for the last 10 years - maybe this is what the US are modelling their solution on.

Unfortunately the US has less to export and the consequences of QE on the worlds reserve currency is catastrophic.

 

Isn't it lucky they can't print gold.

Tue, 06/14/2011 - 06:57 | 1367186 topcallingtroll
topcallingtroll's picture

Too timid, too little, and too late.

People are fooled by all the zeros after the stimulus numbers.

They do not understand the size of the deflation monster. He was there all along.

I warned you hyperinflationistas constantly about this deflation monster since the day i adopted my new avatar.

Just three months ago the consensus on zero hedge was ben had already gone too far and hyperinflation was imminent.

Tue, 06/14/2011 - 08:01 | 1367247 Version 7
Version 7's picture

The financial earthquake will arrive in July, when the companies' quarterly earnings

reports are made available and folks realize what happened to their businesses in the aftermath.

Tue, 06/14/2011 - 08:21 | 1367281 spanish inquisition
spanish inquisition's picture

Great business opportunity in Japan to get a loan to start a business making a line of glowing everything.

Tue, 06/14/2011 - 10:29 | 1367533 boiltherich
boiltherich's picture

Since when is 6 billion dollars in an economy the size of Japan called a stimulus?  I was getting a bedtime check on overnight futures at Bloomberg last night and the BOJ announced they gave more than that to TEPCO to help it finance claims against the company related to radiation.  The BOJ spends more than that on paper to print up their "currency."  Six billion is not enough to make up for lost sales at Toyota. 

Maybe this non story IS the story, but why report on actions by the BOJ that amount to what we spend on pizza every other day?

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