* Solid exports underpinning Japan's economic recovery -
* Adds lingering pain from COVID-19 will keep recovery
* BOJ will ease without hesitation as needed - Amamiya
* BOJ seen leaning toward Dec decision on extending
* Sees no impact on rate formation from new regional bank
TOKYO, Dec 2 (Reuters) - The Bank of Japan is ready to
extend beyond March a range of steps aimed at easing corporate
funding strains, its deputy governor said, suggesting a decision
could come as early as this month as a resurgence of COVID-19
infections cloud the outlook.
Masayoshi Amamiya said Japan's economy was recovering thanks
to a rebound in automobile exports, which will help prevent a
return to deflation.
But he warned that the lingering pain from the pandemic will
keep any recovery moderate and companies under financial stress,
with risks to the world's third-largest economy being skewed to
"The BOJ will closely watch the impact of COVID-19 (on the
economy) for the time being and take additional easing steps
without hesitation as needed," Amamiya told an online meeting
with business leaders in Akita, northern Japan, on Wednesday.
"We also plan to extend as needed the deadline for our
programmes" to deal with the COVID-19 fallout, he said.
The BOJ eased policy in March and April mostly by ramping up
asset purchases and creating a new facility to funnel funds via
financial institutions to cash-strapped firms hit by COVID-19.
The package of measures was deployed as a temporary measure
that expires in March next year, unless the BOJ decides to
extend the deadline.
An extension has been widely viewed as a done deal, with the
BOJ leaning toward a decision at its Dec. 17-18 rate review in
December to reassure markets it is acting quickly to forestall a
Amamiya also said he wanted to launch "as quickly as
possible" a planned new scheme in which the BOJ would pay 0.1%
interest on deposits held by regional banks that improve their
finances or consolidate while coping with years of low interest
"The chance is very low that a new scheme to boost regional
finances would affect interest rate formation in the market as a
whole," Amamiya said, referring to some concerns it could impact
broader rate policy.
"Even if there's any effect, it could be fully offset by
monetary adjustment. In that sense, there's a clear distinction
from monetary policy."
(Reporting by Leika Kihara; Additional reporting by Kentaro
Sugiyama and Tetsushi Kajimoto; Editing by Chris Gallagher,
Stephen Coates and Kim Coghill)