Tokyo - Japan's central bank on Tuesday announced it would purchase subordinated loans worth 1 trillion yen (10 billion dollars) issued by commercial banks to help improve their capital ratios, so that they can lend more money to businesses.

The Bank of Japan (BoJ) decided on the move at a policy board meeting Tuesday as funding conditions tighten in the money market before the current fiscal year ends on March 31.

The BoJ board was expected to announce a monetary policy decision at the end of the meeting Wednesday.

Subordinated loans can be counted as banks' supplementary capital since they are given lower repayment priority than other forms of debt in exchange for higher borrowing rates.

Including them as part of their capital allows banks to give out more loans to businesses. (dpa)