BOJ to Offer Banks Zero-Rate Loans to Tackle Climate Change

The Bank of Japan said it would help finance projects addressing climate change, adding to the debate over whether environmental issues should be part of a central bank’s mission.

The Japanese central bank’s plans released Friday include no-interest loans to commercial banks to support their lending for projects judged to be environmentally friendly and the purchase of green bonds in foreign currencies.

“We can reduce the concerns and the risk of economic instability caused by climate change by making it easier for companies to make such investments,” said Bank of Japan Gov. Haruhiko Kuroda.

The decision followed a July 8 action plan released by the European Central Bank in which the ECB said it would incorporate climate change broadly into its decision making and ensure that the companies whose bonds it buys are in tune with Europe’s climate targets.

The European and Japanese approaches contrast with the Federal Reserve, whose chairman, Jerome Powell, said in June, “We do not seek to be climate policy makers.”

This post first appeared on wsj.com