Bank of Japan announces lending investment for fighting climate change

Japan's central bank on June 18 announced its first investment fund for efforts to address climate change. The Bank of Japan said in a statement that the new investment would "provide funds to financial institutions for investment or loans that they make to address climate change issues based on their own decision" by the end of the year. The bank hopes to launch the new scheme within 2021. 

Bank of Japan announces green investment fund

The Bank of Japan will release a preliminary outline of its plan at its next policy-setting meeting in July. The new scheme will be a successor to an existing programme aimed to promote economic growth. The bank expects that the decision will help in supporting private sector's efforts on the issues from a central bank's standpoint that will contribute to "stabilising the macroeconomy in the long run". With this decision government aims to provide market neutrality, the bank said.

"Climate change issues could exert an extremely large impact on developments in economic activity and prices as well as financial conditions from a medium- to long-term perspective", the Bank of Japan said in a statement."

According to the statement of Monetary policy, the Bank of Japan has extended the special program to support financing against the COVID-19 pandemic. The bank will continue the special program until the end of March 2022, the Bank said in a statement. The Bank of Japan will apply a negative interest rate of minus 0.1 percent to the Policy-Rate Balances in current accounts held by financial institutions at the Bank. The bank in the statement also announced that they will buy a necessary amount of Japanese government bond without setting an upper limit. 

The financial firms have started making efforts towards climate change. The Bank of England has launched new stress tests to reveal the level of exposure and resilience of the UK’s banking systems to climate change. The Federal Reserve in March created a new Supervision Climate Committee (SCC) to strengthen the capacity to identify and assess financial risks from climate change. It aimed to develop an appropriate program to ensure the resilience of financial system to those risks.

IMAGE: AP