The Central Bank of Japan links its monetary policy to climate action in the wake of the Fed, the ECB and more
The Central Bank of Japan (BoJ) today presented a plan to increase funding for climate change activities.
The institution also announced that it will maintain its robust monetary stimulus to support the country's recovery from the coronavirus crisis – with short-term interest rates of -01 percent – and that it has postponed the deadline of the programs by six months. loan and asset purchases that were introduced last year to channel funds to companies most affected by the pandemic.
WHAT THE BANK OF JAPAN SAID
The Bank of Japan said it plans to launch the "climate finance" program by the end of the year. Next month, however, it will publish a preliminary outline.
In a statement, the BOJ stated that “issues related to climate change can have an extremely large impact on economic activity, prices and financial conditions in the medium and long term. From the perspective of a central bank, supporting the efforts of the private sector will help stabilize the economy in the long term ”.
HOW THE PLAN WILL WORK
Details of the climate finance plan have not yet been announced. The BOJ only said it will provide funds to financial institutions that increase lending and funding for climate change activities.
In short, the program will be modeled, in its operation, on an already existing BOJ scheme and related to the granting of subsidized loans to financial institutions that provide many loans in industrial sectors deemed to be expanding.
WHAT JAPAN IS DOING TO PROMOTE DECARBONIZATION
Naomi Muguruma, an economist at financial services firm Mitsubishi UFJ Morgan Stanley Securities, told Reuters that the BOJ is aligning with the Japanese government's climate agenda, which last October announced its commitment to achieving carbon neutrality (i.e. net zeroing of greenhouse gas emissions) by 2050.
Japan's climate-financial effort is not limited to the domestic sphere, but is also directed abroad. The government is in fact working on a $ 10 billion public-private loan and investment mechanism to support the decarbonization process in the ten ASEAN countries, the Association of Southeast Asian Nations.
WHAT THE ECB DOES ABOUT CLIMATE
The BOJ is not the only central bank to have linked its monetary policy to climate action. The European Central Bank (ECB) is perhaps the most active on this front: the European Union, on the other hand, wants to take on the international fight against global warming.
The president of the ECB, Christine Lagarde, made the climate issue a priority, and in this regard she recently declared that "the short-term costs of the transition [energy, ed ] pale in comparison to the medium and long-term costs of not containing the climate change ".
The ECB has invested in green bonds and included climate risk among the factors used in its annual review on the condition of banks, which serves to assess whether these institutions have sufficient financial reserves to meet any losses.
Last November, the ECB set up a supervisory committee to monitor the exposure to climate risk (floods, fires, droughts) of the assets of financial institutions. On this point, Bloomberg wrote at the end of April that the ECB was examining the situation of 112 big lenders – that is, large entities that lend money – and that it could impose compliance with minimum requirements on the most exposed.
THE MOVE OF THE FED IN THE UNITED STATES
Similarly, the central bank of the United States – the Federal Reserve (Fed) – has requested credit institutions to begin disclosing information on measures taken to mitigate the climate risks of their portfolios. Again, it would appear that the Fed is aligning with President Joe Biden's climate agenda.
THE “STRESS TEST” OF THE BANK OF ENGLAND
Ten days ago the central bank of the United Kingdom, the Bank of England, launched a major stress test for the country's largest banks and insurance companies to assess their degree of resilience to climate change: among those involved are groups banks HSBC and Barclays and insurance companies Aviva and Phoenix Group.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/giappone-banca-centrale-cambiamento-climatico/ on Fri, 18 Jun 2021 11:33:40 +0000.