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Effect of a funding-for-lending program: Evidence from the Bank of Japan’s COVID-19 operation

Author

Listed:
  • Gunji, Hiroshi
  • Ono, Arito
  • Shizume, Masato
  • Uchida, Hirofumi
  • Yasuda, Yukihiro

Abstract

In this study, we examine the effect of a 2021 policy change by the Bank of Japan during COVID-19 that gave an incentive to banks to use non-guaranteed preferential loans over guaranteed loans. By assessing the causal effect of this change on banks’ loan composition, we find that the policy change decreased the ratio of guaranteed loans to total loans. We also find that this decline was driven by a reduction in guaranteed loans, not by an increase in non-guaranteed loans, suggesting that the policy effectively reduced banks’ reliance on government guarantees.

Suggested Citation

  • Gunji, Hiroshi & Ono, Arito & Shizume, Masato & Uchida, Hirofumi & Yasuda, Yukihiro, 2026. "Effect of a funding-for-lending program: Evidence from the Bank of Japan’s COVID-19 operation," Economics Letters, Elsevier, vol. 263(C).
    • Handle: RePEc:eee:ecolet:v:263:y:2026:i:c:s0165176526001205
    DOI: 10.1016/j.econlet.2026.112926
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    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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