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BOJ to pump nearly $16 billion to economy via loan scheme, amount doubles on new incentive

A man wearing a protective mask walks past the headquarters of Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo

TOKYO (Reuters) - The Bank of Japan offered on Tuesday to pump 1.7 trillion yen (£12.83 billion) into the economy under its lending scheme aimed at boosting loans to companies hit by the widening fallout from the coronavirus pandemic.

The amount offered to financial institutions at Tuesday's auction was nearly double that of the previous auction held on May 14, BOJ data showed, a sign that the programme is helping to channel money to cash-strapped firms suffering from the pandemic.

The three-month loans will be delivered to financial institutions on Wednesday. The total balance of money pumped out under the scheme stood at 14.4 trillion yen, the data showed.

The BOJ created the scheme in March as part of steps to ease corporate funding strains, under which it extends zero-interest loans to financial institutions in the hope that they will use the money to boost lending to pandemic-hit firms.

The central bank expanded the scheme in April by accepting a wider range of collateral and pledging to pay 0.1% interest to financial institutions that tap loans.

The promise to pay the 0.1% interest has led to a surge in demand from financial institutions for the programme.

(Reporting by Leika Kihara; Editing by Gareth Jones)