Japan is stepping up efforts to encourage banks to lend more to business amid fears that a credit crunch will worsen in the run-up to the fiscal year-end on March 31.

The Bank of Japan launched an emergency programme on Thursday to give financial institutions loans at favourable terms to encourage banks to supply more funds to companies. The central bank will supply an initial Y1,224.8bn ($13.4bn, €9.8bn, £8.9bn) through the special operation, a temporary measure unveiled last month. It will carry out similar operations twice a month until the end of March.