This photo shows the Bank of Japan headquarters building in Tokyo's Chuo Ward. (Mainichi)

       TOKYO (Kyodo) -- The Bank of Japan began a two-day policy-setting meeting Thursday to discuss the need for an extension beyond the end of March to its COVID-19 funding support program amid uncertainty over the new Omicron coronavirus variant.

       The Policy Board is widely expected to maintain its ultraloose monetary policy as the economic recovery remains fragile and the country's inflation remains subdued, in stark contrast to the United States and some European nations.

       The U.S. Federal Reserve on Wednesday signaled three interest rate hikes next year and decided to withdraw its bond purchases faster than earlier planned to cope with surging inflation. The European Central Bank is scheduled to hold a policy meeting on Thursday.

       In Japan, the recovery from the COVID-19 fallout remains uneven between manufacturers and service providers, as well as among companies depending on their size. Small and midsize firms are seen as facing greater funding needs than bigger ones.

       The BOJ's funding support program launched last year consists of providing cheap funds to financial institutions extending loans to financially struggling firms, and buying commercial paper and corporate bonds.

       The BOJ is considering scaling back support for large companies by trimming purchases of commercial paper and corporate bonds issued by them, as their funding conditions have been improving, sources familiar with the matter said earlier.

       But the central bank is expected to leave support intact for small and midsize companies, according to the sources.

       In the latest quarterly Tankan survey, the index for corporate financing -- or the percentage of firms saying funding conditions are easy minus those responding they are tight -- remained unchanged for big companies but fell among small and midsized firms.

       Confidence among major restaurant and hotel operators as well as providers of face-to-face services improved drastically in the survey for December from three months earlier but there were more pessimists than optimists.

       The BOJ has maintained that the Japanese economy remains in a "severe" situation due to the impact of COVID-19 at home and abroad but it has picked up as a trend.

       The BOJ has set short-term interest rates at minus 0.1 percent while guiding 10-year Japanese government bond yields around zero percent under its yield curve control program.

       The country's core consumer price index excluding volatile fresh food items was up 0.1 percent from a year ago in October, despite sharp gains in wholesale prices due mainly to higher energy costs and a weaker yen. The figure is still far from the BOJ's 2 percent inflation target.

       Font Size S M L Print Timeline 0