TOKYO: Japan's government and ruling coalition are considering a measure to provide subordinated loans to financially troubled big businesses hit by the coronavirus crisis, Jiji Press learned Wednesday.

The government and the Liberal Democratic Party-led coalition aim to expand special loans to deal with crises extended by the government-backed Development Bank of Japan, in order to provide such companies with subordinated loans, part of which can be treated as capital.

Banks become cautious about extending fresh loans to companies if the companies expand borrowings sharply to deal with the COVID-19 crisis. If funds are procured through subordinated loans, the pace of increase in debts would be slower.

The DBJ extends loans and buys corporate bonds under the crisis response special loan program, with debt guarantees from the government.

At a meeting of the Council on Investments for the Future on Thursday, the government will discuss a change to the program so that the DBJ can provide subordinated loans to struggling big companies, informed sources said.

JIJI Press