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Bank of Japan may buy subordinated debt

March 17, 2009 at 7:44 PM

TOKYO, March 17 (UPI) -- The Bank of Japan said Tuesday it was considering accepting $10 billion of subordinated loans and bonds from commercial banks to spur lending.

Bank Gov. Masaaki Shirakawa called the maneuver "an extremely extraordinary measure," Kyodo News reported Tuesday.

Banks count subordinated debt as supplementary capital. By shifting these lower priority debts to capital, the central bank expects lending to increase, Kyodo said.

Shirakawa made the announcement as bank policy makers headed into a two-day meeting Wednesday.

In a statement, the bank said it feared lending may tighten with continued drops in the stock market, Kyodo said.