TOKYO, March 29: The Japanese government and the Bank of Japan (BOJ) are working towards a package of measures to support small and mid-size firms battered by the nation’s poor economy, the Nihon Keizai Shimbun (Nikkei) said on Saturday.

The central bank faces mounting pressure to stimulate Japan’s ailing economy, and top government officials are set to meet with newly appointed BOJ governor Toshihiko Fukui and his deputies for informal talks after the bank’s April 7-8 policy meeting.

Key among the proposals being considered is that the BOJ would, as part of its open-market operations, buy commercial paper backed by small and mid-size firms’ accounts receivable — payments due to them from customers after business transactions — from financial institutions, the Nikkei said.

The BOJ has bought accounts-receivable asset-backed commercial paper (ABCP) under repurchase agreements and accepts them as collateral since last year, but calls have risen for the bank to consider outright buying.

Fukui has shown he is open to such suggestions, telling parliament on Friday that a market for such securitised products would help smaller firms obtain money more easily, since they would be able to convert unsettled payments into cash quickly.

Other possible measures could include a widening of the scope of government-provided loan guarantees and lending programmes run by government-affiliated lending institutions, the paper said.

The measures could be firmed up as early as mid-April.

Officials at the BOJ and Finance Ministry were not immediately available for comment.

That the government and BOJ must act as one to end Japan’s protracted deflation has become a mantra for Prime Minister Junichiro Koizumi, who chose Fukui last month to head the central bank.

Fukui, who took office on March 20, has put emphasis on speedy action. He called a rare emergency policy meeting earlier this week, citing increasing economic uncertainty in the face of a war in Iraq and volatile global financial markets.

The Bank of Japan (BoJ) will team up with the government and draw up measures to supply funds to small and midsize companies, a newspaper said on Saturday.

The central bank will consider purchasing from financial institutions commercial paper backed by accounts receivable of the issuer companies, the Nihon Keizai Shimbun said.

The purchases by the BoJ would make commercial banks feel safer to buy such commercial paper from small and midsize firms and thus smooth the way for the firms to turn their receivables into cash more quickly, it said.

Banks’ reluctance to lend money to smaller businesses has been cited as a factor hampering the government’s efforts to stimulate the deflation-hit economy and BoJ’s ultra-loose monetary policy.

The BoJ could formulate a concrete plan as early as by its next monetary policy meeting, set for April 7 and 8, the daily said. —Reuters/AFP