Bank of Japan to buy corporate bonds to widen funding sources

The Bank of Japan said it will buy corporate bonds for the first time, widening its asset-purchase program to prevent a shortage of credit from deepening the recession.

The central bank will buy as much as 1 trillion yen ($10.7 billion) in bonds rated A or higher from March 4 to Sept 30. The policy board kept the overnight lending rate at 0.1 percent in a unanimous vote, it said in a statement in Tokyo yesterday.

Governor Masaaki Shirakawa said the economy will remain in a "severe" state next quarter and companies will continue to struggle to obtain financing as investors shun risk. With the key rate close to zero, the central bank is buying assets from lenders to lower longer-term borrowing costs, and its next moves may include adding stocks as collateral and purchasing more government bonds, economists said.