Tokyo, Dec 17 (IANS): The Bank of Japan (BOJ) on Friday announced its decision to scale back Covid-19 funding support for large companies while maintaining its monetary policy and support for small and midsize firms.

The BOJ decided on a two-day policy-setting meeting to reduce its buying of commercial paper and corporate bonds issued by large firms, but retain a program supporting small and midsize firms until September, reports Xinhua news agency.

In addition, the Japanese central bank will continue to set short-term interest rates at minus 0.1 per cent while guiding 10-year Japanese government bond yields around zero percent, as its 2 per cent inflation target is still far off.

"Financial conditions in Japan have improved on the whole, despite the continued significant impact of the novel coronavirus on domestic and overseas economies," the BOJ said in a post-meeting statement.

The BOJ's funding support program consists of purchases of commercial paper and corporate bonds issued by large firms with a combined limit of 20 trillion yen ($176 billion), and the provision of cheap funds to financial institutions extending loans to financially struggling smaller firms.

From April, it will gradually reduce commercial paper and corporate bonds purchases to the pre-pandemic levels of around 2 trillion yen and 3 trillion yen, respectively.

The central bank will also continue to purchase exchange-traded funds with an upper limit of 12 trillion yen a year.