Bank of Japan unveils $33bn loan scheme

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Policy makers are attempting to boost Japan's sluggish recovery

Japan's central bank has announced plans to provide up to 3 trillion yen (£22bn; $33bn) in low interest loans in an effort to spur economic growth.

The bank plans to make the money available to commercial banks to encourage them to lend more to private businesses.

Firms in growth sectors including energy, the environment and tourism will be targeted by the scheme.

The Bank of Japan also confirmed it would hold interest rates near zero.

Rates have remained at 0.1% since the end of 2008, with Japan continuing to fight deflation and recover slowly from recession.

The bank gave no indication that interest rates would rise in the near future, saying it planned to keep monetary policy "extremely accommodative".

Impact questioned

Meanwhile it said its lending programme should help boost productivity and raise the economy's growth rate.

The plans allow approved banks to borrow up to 150bn yen each for up to four years at an interest rate of 0.1%.

The scheme is due to begin at the end of August.

But economists questioned what impact, if any, the plan would have on economic growth.

"We see little impact at this stage due to a lack of demand for funds," said Chiwoong Lee, economist at Goldman Sachs.

The Bank of Japan is also likely to come under further pressure from Japan's new prime minister, Naoto Kan, who has cited the country's massive debt levels as a chief concern.

Deflation is also a worry, with prices currently falling at an annual rate of 1.5%.

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