The Bank of Japan may lend at least 1 trillion yen ($11 billion) to commercial banks under a new loan program to support industries with growth potential that was outlined last month, the Asahi newspaper said on Wednesday.
The central bank will begin lending to banks from September and keep the facility in place for about five years, the paper said without citing sources.
In what it sees as a long-term approach to beating deflation, the BOJ outlined a program last month under which it offers one-year loans at 0.1 percent interest to banks that will fund projects in sectors with growth potential.
It is expected to announce details of the framework, such as when it will start, when it will expire and the amount of funds to be offered, at its next policy-setting meeting on June 14-15.
The BOJ has said the loan plan is not intended to be monetary easing but is aimed more at encouraging commercial banks to cultivate industries with new areas of growth.
BOJ Governor Masaaki Shirakawa has said the central bank may set a limit to the amount of loans that will be extended, so the money flowing into the economy would not influence monetary policy.
The BOJ is still having consultations with commercial banks in mapping out details of the scheme.
It is examining offering a combined 1 trillion yen in loans to banks, including about 100 billion yen each to Japan's three megabanks, the Asahi said.
It may raise the cap if demand for funds from banks is strong, the paper said.
The BOJ has kept interest rates near zero since late 2008 and loosened monetary policy through a facility offering cheap funds to banks. While that has helped the economy recover from a severe slump after the Lehman crisis, Japan remains mired in grinding deflation due largely to weak domestic demand.
(Editing by Michael Watson)