TOKYO (Reuters) – The Bank of Japan may have a bigger role to play in helping businesses hit by the coronavirus pandemic, said a former economy minister closely linked to Yoshihide Suga – the frontrunner to become the next Prime minister.

Heizo Takenaka said Japan needs to switch to payback loans to help businesses survive the pandemic.

“Payments will leave behind a huge fiscal burden … We need to shift to support through loans,” he told Reuters on Thursday.

“The BOJ can play a slightly bigger role,” such as lending directly to businesses affected by the pandemic, he said.

The BOJ currently has a loan facility that encourages financial institutions to increase lending to businesses, but does not offer loans directly to them.

Regarding the BOJ’s negative interest rate policy, Takenaka said that while the central bank still had the leeway to push rates deeper into negative territory, it was “difficult to predict effectiveness.”

Takenaka, currently a professor at the University of Toyo and a member of a government panel on future investments, has Suga’s ears due to a relationship dating back to when Takenaka was minister in charge of financial services at the start of the 1990s. 2000s.

Takenaka’s views could thus influence the economic policies of Suga, who is the frontrunner to become the next prime minister of Japan later this month after Shinzo Abe’s abrupt decision to step down.

Takenaka, who played a key role in tackling Japan’s domestic banking crisis in the late 1990s, said regional banks needed to adapt their business models heavily reliant on traditional lending in order to overcome structural challenges facing banks. profits.

“They need to rebuild their business models. Obviously, if there is legitimate competition, the number (of regional banks) would decrease. “

His point of view echoes that of Suga, who said on Wednesday that there were too many regional banks in Japan.

Suga said he would advance Abe’s “Abenomics” stimulus policies, but offered little clue on specific new steps he would take to revitalize the economy.

Takenaka said the government should focus on its recent goal of promoting digitization in Japan, for example by creating an interim agency specializing in the field.

He was against the idea, floated by some lawmakers, of cutting Japan’s sales tax rate by 10% now to stimulate consumption. “Once you’ve increased it, it’s better to offer payments in a different form rather than trying to lower the rate again.”