According to board member Hitoshi Suzuki, the Bank of Japan may end its pandemic-relief funding programmes in March since corporate funding conditions have improved greatly since the cash crunch created by the COVID-19 crisis last year.
The programmes' fate will largely be determined by how the Omicron variant's spread affects the economy, he noted.
The central bank is expected to debate whether to extend the March 2022 deadline for a set of measures launched last year to relieve immediate corporate finance strains caused by the pandemic at its policy meeting this month.
While Suzuki said he was undecided about the programmes' fate, he emphasised that many companies' financial conditions have improved, thanks in part to enormous government and central bank support to soften the economic impact of the pandemic.
He said that funding circumstances have improved for large corporations in particular, resulting in a narrowing of the spread for Japan's corporate bonds and commercial paper.
Suzuki said that "the programmes must be terminated at some time in the future," because they were implemented as a temporary measure to deal with the pandemic's initial hit. "Banks have a lot of cash on hand and can assist borrowers with their regular operations. As a result, ending the BoJ's programmes would be a viable option."
With the pandemic still doing damage to the economy, many analysts believe the BoJ will keep the programmes in place beyond March. However, some analysts think the BoJ could dial them back by reducing its purchases of corporate bonds and commercial paper.
BoJ policymakers have held internal discussions about phasing out the programmes, which were meant to be temporary, if infection rates continue to fall, according to sources.