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Japan unveils $6bn business boost, keeps rates on hold

The Bank of Japan (BOJ) has unveiled a 500bn yen ($6.2bn; £3.8bn) credit line to help small businesses in the country.

The country's banks will able to use this facility to extend loans to smaller firms without using real estate as collateral.

Japanese firms have been facing a tough time in wake of the destruction caused by the earthquake and tsunami.

The BOJ also kept interest rates unchanged, at between zero and 0.1%

"The BOJ is also sending a message to the public that it is doing its part to enhance growth and beat deflation by boosting loans for growth sectors," said Masamichi Adachi of JP Morgan Securities.
Growth concerns

The destruction caused by the 11 March earthquake and tsunami in Japan saw many factories suspend or curb their production.

That resulted in many businesses forecasting a fall in profits or even incurring losses due to damage caused to their factories and subsequent loss of revenue.

While progress has been made in restoring the supply chain, analysts say that demand is not rising as fact as policy makers had expected.

On Monday, the cabinet office had reported that core machinery orders in Japan fell 3.3% in April, compared with the previous month.

"The truth is there are more reasons to be concerned about the outlook than to be optimistic," said Tetsu Aikawa of Shinsei Bank.

"Reconstruction demand isn't coming as soon as many people were expecting, which we saw in weak machinery orders data," he added.

However, the Bank of Japan has a different view.

It says the economy has started to recover despite all the difficulties.

"Japan's economy is under downward pressure, mainly on output, due to the quake's impact but showing some signs of picking up," the bank said.

BBC News

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