Companies are struggling to raise funds as markets deteriorate, Bank of Japan Gov. Masaaki Shirakawa said Friday, adding to speculation that the BOJ will start buying corporate debt.
"It's becoming harder for companies to raise funds through commercial paper and corporate bond markets," Shirakawa told a quarterly meeting of the bank's regional chiefs in Tokyo. The credit squeeze has spread from small to larger companies and banks have become more reluctant to lend, he said.
With interest rates already near zero, Shirakawa is looking for ways to unlock credit markets and prevent the nation's recession from deepening. Policymakers may announce plans to buy corporate bonds to improve companies' access to cash, economists said.
"The BOJ has already decided to purchase commercial paper outright. Corporate bonds are probably next," said Kiichi Murashima, chief economist at Nikko Citigroup Ltd. in Tokyo. "Conditions for the corporate sector have deteriorated very rapidly."
The global recession that shaved 40 percent off the Nikkei 225 stock average in the past year has spurred a fund shortage for companies. Selling debt has become more costly for firms since the collapse of Lehman Brothers Holdings Inc. in September.
In Japan, about ¥1.3 trillion in corporate bonds will come due by the end of March, putting pressure on businesses to find new sources of funding.
"Continued strains in global financial markets are driving down stock prices and raising credit costs, which are starting to affect the businesses of financial institutions," Shirakawa said.
