By Leika Kihara and Tetsushi Kajimoto
TOKYO (Reuters) - The Bank of Japan said on Friday it will launch a new scheme to encourage financial institutions to boost lending and investment for fighting climate change, in a surprise move underscoring the growing attention central banks are putting on the topic.
The BOJ said it expects to launch the scheme by the end of this year, and will release a preliminary outline of the scheme at its next policy-setting meeting in July.
"Climate change issues could exert an extremely large impact on economic activity, prices and financial conditions from a medium- to long-term perspective," the BOJ said in a statement.
"Supporting private-sector efforts from a central bank's standpoint will contribute to stabilising the economy in the long run," it said.
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As widely expected, the BOJ kept its yield curve control target at -0.1% for short-term rates and 0% for 10-year bond yields at the two-day rate review that ended on Friday.
The central bank also decided to extend by six months the September deadline for asset-buying and loan programmes introduced last year to channel funds to pandemic-hit firms.
Japan's economy shrank an annualised 3.9% in the first quarter and is seen making only a modest rebound, if any, in the current quarter as anti-virus measures weigh on consumption.
Core consumer prices in May rose 0.1% from a year earlier, marking the first year-on-year increase since March 2020 but remaining far distant from the BOJ's 2% goal.
A recent pick-up in the pace of COVID-19 vaccine inoculations has heightened hopes among policymakers that a rebound in consumption, combined with already robust exports, may accelerate the economic recovery in the latter half of this year.
(Reporting by Leika Kihara and Tetsushi Kajimoto; Additional reporting by Daniel Leussink; Editing by Kim Coghill, Jacqueline Wong and Ana Nicolaci da Costa)
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