business

BOJ launches unlimited commercial bank loans

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© 2012 AFP

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The Bank of Japan providing with funny money to every commercial bank for an interest almost non existent... Basically money created out of thin air.

The effect on the value of the yen is positive for the economy as a whole but, shouldnt the Bank of Japan DEMAND the other banks to offer those loans only to people and companies with the intention to create new and creative services and goods and therefore contributing to the whole country?

I really hope I dont see that money spent on derivatives, swaps or other speculatives products with the only purpose of increasing the money in the pockets of the bankers.

4 ( +5 / -1 )

Wasn't it the banks with their loans that caused the global crisis in the first place?

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Synbios, while I agree with your thoughts.. the national banks are under no legal obligation to lend this money out. Which would essentially cause this qe to fail.

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More helicopter money. Doomed to fail.

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@Synbios

Yeah, they took a page out of the USA's Federal Reserve's funny money playbook.

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malfupete I know that they are not obligated to do so, but since that money is going to appear out of nothing (causing an effect on the inflation which affects not only the banks but every citizen that has a salary or savings) there should be a way to limit the use of that money.

Although we all know how central banks (which are in private hands) work and they are doing the same everywhere: lending to private banks at a low interest rate, then that bank buys national bonds or speculative products which give higher interest rates and so in the end the private banks get a profit. If only common people knew...or cared...

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malfupete Oct. 30, 2012 - 09:53PM JST

Exactly. Which is why there has been no major inflation despite trillions in worldwide QE. However, there have been record profits from the banks would receive this money as they use it to buy equities and treasuries instead of lending the money to fund economic activity (which would spur inflation). Of course, on the other side of the issue are potential borrowers who are not anxious to go into debt given the weak economic outlook. It's a death spiral which only benefits banks and politicians who have no solutions to this mess but need to appear to be doing something constructive.

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“The bank decided to provide long-term funds… at a low interest rate to financial institutions at their request, with the view to promoting their aggressive action and helping increasing proactive credit demand of firms and households,” it said, adding that the amount of loans was “unlimited.”

So the question remains, are these banks obliged to use this easy money for lending to consumers and businesses for real productive purposes? Or will it find it way into speculative activity?

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So the question remains, are these banks obliged to use this easy money for lending to consumers and businesses for real productive purposes?

There is no demand from qualified borrowers. The government cannot force companies to borrow money. So, yes, the banks will simply use the money to make money. The government gets the benefit of these banks buying bonds. It is insane.

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Like watering a dead plant.

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I hear softbank will probably need to borrow a few billion to buy sprint...

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