This file photo shows the head office of the Bank of Japan in Tokyo. (Mainichi)

       TOKYO (Kyodo) -- The Bank of Japan is considering reducing its funding support for large companies hit by the COVID-19 pandemic as their funding conditions have been improving, sources familiar with the matter said Friday.

       The BOJ is weighing the option of keeping a scaled-back version after the current program ends at the end of March, leaving support intact for small and midsize companies facing greater funding needs than bigger ones, the sources said.

       The Japanese central bank is expected to discuss what to do with the funding program at a two-day policy-setting meeting from Thursday.

       The option under consideration is to reduce purchases of corporate bonds and commercial paper issued by large companies, according to the sources.

       The BOJ had a purchase limit for such debts of 5.4 trillion yen ($47 billion) before the pandemic and has expanded it in stages since the spring of last year to around 20 trillion yen at present.

       The Policy Board is expected to take into account data on corporate funding conditions in the quarterly "Tankan" business confidence survey due out on Monday.

       The board members may wait until their policy meeting in January to make a decision, however, depending on the spread of the Omicron variant of the coronavirus in Japan and its impact on corporate earnings, the sources said.

       Economic activity has been picking up in Japan with a COVID-19 state of emergency fully lifted amid a downturn in newly confirmed cases. But the recovery from the pandemic fallout remains uneven between manufacturers and nonmanufacturers, with small and midsize firms lagging behind bigger ones.

       In addition to the buying of corporate bonds and commercial paper, the BOJ has been providing cheap funds to financial institutions extending loans to firms hit hard by COVID-19.

       BOJ Deputy Governor Masayoshi Amamiya said Wednesday that the central bank is expected to make a decision on the funding program in December or January, adding that some small and midsize companies are still facing "severe" funding conditions.

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