Japan to give banks low-interest dollar funding for infrastructure loans
TOKYO -- Japan's government will make low-interest dollar funding available to domestic banks to support lending for overseas infrastructure projects involving Japanese companies.
The 200 billion yen ($1.88 billion) program, part of an upcoming economic stimulus budget, will be administered by policy lender Japan Bank for International Cooperation and paid for by government-backed dollar bonds.
With demand for the world's reserve currency brisk, Japanese banks' dollar borrowing costs are running about double that of their European peers. JBIC is expected to raise dollars through its bond sale at an interest rate premium about 0.2 percentage point lower than private-sector Japanese lenders can do. It could also tap into surplus dollar funds to provide additional lending support.
The types of infrastructure that could qualify for funding include electric power, natural resources and renewable energy. The idea is to help trading houses, plant builders and other Japanese bidders offer the most favorable terms.
Legislation enacted in May enables JBIC to dispense such aid, but the bank has yet to do so.
The stimulus package, plans for which are supposed to come together in early August, is also expected to include several hundred billion yen in additional capital for the Japan International Cooperation Agency, Nippon Export and Investment Insurance and other government-backed financial institutions, for the purpose of promoting infrastructure exports.