Japan’s biggest banks have issued $1bn of bonds in a bid to shore up its cash reserves amid fears that the country could face a capital shortfall as the economy struggles to recover from the devastating tsunami.
The central bank announced the issuance of the securities in a statement on Thursday.
The bonds will be sold at a yield of 3.4% and can be redeemed in 2027 for yen or dollars.
The bonds have been sold in the three main Japanese banks since late November, when the bank raised $1,500m to cover a shortfall of about $800m.
Japan’s economy has already contracted for a fourth straight year, the biggest decline since the 2008 financial crisis.
Its stock markets have plunged.
It is the biggest single creditor of the Bank of Japan, which has had to borrow more than $3.5tn in the past three years to maintain its stimulus programmes.
The government is also cutting its debt-to-GDP ratio, which had been above 20% before the tsunami, to a more manageable level of 15.7% this year.
The Japan Banking Association said on Friday that the government’s decision to buy bonds would help boost the economy.
“It will help restore confidence in the economy and raise confidence among investors,” said Tetsuya Kawaguchi, the association’s chief economist.
The bond issue follows a series of other attempts to raise capital from the banks in recent months.
In February, Mitsubishis subsidiary Mizuho Bank raised about $1 billion in a bond offering.
In June, Mitsuba Bank and Mitsubashi Mitsubuchi Asset Management raised $300m each.
Last month, Mitsuho, Mizuhos main lender, issued $3bn of securities.
The central banks actions followed an announcement by the central bank last week that it would purchase $1tn of debt from its bondholders in a fund that will be used to shore-up the nation’s reserves.
Japan is already running out of cash as the government struggles to raise cash for its massive debt.
Last year, its government held $2.6tn in foreign reserves, which it will need to meet its obligations, such as paying for the tsunami relief.
Tokyo has promised to spend more than 2% of its gross domestic product (GDP) to cover the cost of the tsunami response, but economists fear that the plan could backfire.
The Reserve Bank of Australia on Wednesday announced that it was buying $1trillion worth of government bonds and bonds issued in the public sector.
However, analysts said that the Reserve’s bond buying could not bring Japan’s debt under control.
The Bank of England said last month that it will buy $2tn of bonds and bond issues.