Bank of Japan: Reduced Support For Large Companies: Updated Dec. 29

 https://mainichi.jp/english/articles/20211211/p2g/00m/0bu/008000c

Artcle:

TOKYO (Kyodo) -- The Bank of Japan is considering reducing its funding support for large companies hit by the COVID-19 pandemic as their funding conditions have been improving, sources familiar with the matter said Friday.

The BOJ is weighing the option of keeping a scaled-back version after the current program ends at the end of March, leaving support intact for small and midsize companies facing greater funding needs than bigger ones, the sources said.

The Japanese central bank is expected to discuss what to do with the funding program at a two-day policy-setting meeting from Thursday.

Ideas:

The idea of scaling back funding support for large companies, as their funding options are now improving is probably a good idea and it frees up additional funds for small and medium sized companies that are stilll having problems, especially those in the services sector.

But it must not be forgotten there might be some large companies sitll with pandemic/economic problems and they too need to be looked at carefully and determine how to continue to help them as needed.

A later article about unemployment indicates that ther is a large number of workers who have been layed off in 2021 and the Bank of Japan must not forget about them too.

Another good point to remember, which is in economic textbooks and seen even more in everyday life is the idea that just because the economy is now in the moderate recovery mode or GPD is beginnning improve, that doesn't mean everyone in the economy is recovering from the pandemic as there are proabably many who are not doing too good still, menaing GDP or economic growth is not a good indicator of quality of life or better conditions for everyone.

Article:

The option under consideration is to reduce purchases of corporate bonds and commercial paper issued by large companies, according to the sources.

The BOJ had a purchase limit for such debts of 5.4 trillion yen ($47 billion) before the pandemic and has expanded it in stages since the spring of last year to around 20 trillion yen at present.

The Policy Board is expected to take into account data on corporate funding conditions in the quarterly "Tankan" business confidence survey due out on Monday.

Ideas:

It was good that the Bank of Japane, at the time, expanded it buying of bonds and paper, and maybe now, as some or many large companies are beginning to improve they don't need to continue with such practices, again unless a big company continues to need help from the BOJ.

It must be remembered that the "Tankan" survey is just a survey and doesn't really indicate what companies might do and business conditons can change next week, next month, and the next quarter, they can easily change their minds on what they think and what they do, depending on the business conditions they see and feel.

Small and medium sized businesses most likely don't have the funding resources or options that large companies have and or are more suceptible to changes in the economy than large companies and can't find the resources needed to help them or have the resources to overcome adverse economic conditions.

As such small and medium sized business will probably need help now and in the future and the new omicron virus variant can easily spread into Japan and then small and medium sized companies are back what happened starting in the summer with the delta variant.

Article:

The board members may wait until their policy meeting in January to make a decision, however, depending on the spread of the Omicron variant of the coronavirus in Japan and its impact on corporate earnings, the sources said.

Economic activity has been picking up in Japan with a COVID-19 state of emergency fully lifted amid a downturn in newly confirmed cases. But the recovery from the pandemic fallout remains uneven between manufacturers and nonmanufacturers, with small and midsize firms lagging behind bigger ones.

Ideas:

January might be a good time to make any changs in BOJ policies or action as by that time it can be determined how much the new virus is in Japan and how much its affecting businesses especially small and medium sized businesses.

As  Japan is now in the New Year travel period, there might be a lot of people moving about and many might be traveling. For example, looking at the Haneda ariport webpage and the departure flights from Haneda, on this morning, there weren't any flights cancelled which has been very common during the pandemic period. 

So there is no way exactly to know just how full the flights are, 10, 20, 50 percent etc., it seems Haneda is up and running and back to some kind of normal, at least for the New Year period.

Even in a normal economic period, without the pandemic, in a market economy there are always going to be positives and negatives and not all companies all are growing or always doing well.

So with the pandemic is not surprising that some companies might be good and there are many companies still not doing so good.

And its not surprising that small and medium sized companies are lagging behind the larger companies related to a recovery, as maybe many of thema are either service type companies and maybe even subcontractors of the larger companies, meaning the subcontractors might not be getting the best prices they want from the larger companies have to be "price takers" that the large companies makes them accept.

Article:

In addition to the buying of corporate bonds and commercial paper, the BOJ has been providing cheap funds to financial institutions extending loans to firms hit hard by COVID-19.

BOJ Deputy Governor Masayoshi Amamiya said Wednesday that the central bank is expected to make a decision on the funding program in December or January, adding that some small and midsize companies are still facing "severe" funding conditions.

Ideas:

The providing of cheap loans most likely is reated to the zero percent strategy that the BOJ has been using as a way to help the economy and as way to help banks provide funding to companies that need help.

At the present time the BOJ needs to maintain its present strategy to the banks and directly too to small and medium sized companies still in severe funding or even severe sales and revenue conditions.

Now is not the time for the Bank of Japan or any central bank to change its current strategies of helping companies, and families in need, as the fallout from the pandemic is far from over, and may not be anytime soon as what is happening globally and has yet to hit Japan like much of the EU.

Now is not the time, for example, to "let the market decide" what companies survive and what companies go under. For the good of society and for the good of the economy, the Bank of Japan needs to maintain its present strategies of helping as many companies as it can.

Have a nice day and be safe!