Home / World Business
Tue, Aug 21, 2007 - Page 10 News List

BOJ to pump more funds into Japanese banking system

BLOOMBERG AND AFP , TOKYO

Japan's central bank said yesterday that it would inject ¥1 trillion (US$8.7 billion) into the banking system as part of ongoing efforts to restore calm to financial markets.

The Bank of Japan (BOJ) moved to pump funds into money market for a third straight working day as part of a concerted drive by major central banks to calm fears about the fallout from US mortgage problems.

The latest injection came as Japanese share prices staged a strong rally after Friday's brutal selloff, lifted by a rebound on overseas markets following the US central bank's decision to cut a key interest rate on Friday.

The bank's move aims to curb a rise in short-term interest rates caused by increased demand for new funds.

Central banks from Sydney to Washington have pumped billions of dollars into the global financial system in recent days amid signs that private banks and firms are having trouble raising funds and rolling over debt.

The Fed has pumped US$94 billion into financial markets since Aug. 9 to ease credit.

Expectations that Japan's central bank will raise its key overnight lending rate at its meeting tomorrow and Thursday dwindled after the US housing-loan crisis. Investors see a 4 percent chance of a rate increase this week, down from as high as 75 percent on Aug. 9, Credit Suisse Group said.

"Amid lingering concerns over shrinking credit, the Bank of Japan has no other choice but to keep acting as the lender of last resort in the money market," Goldman Sachs Securities chief economist Tetsufumi Yamakawa said. "But this does not guarantee that there will be no rate hike this week because the relatively firm fundamentals leave the window of opportunity for such an action."

"The Bank of Japan should decide its monetary policy considering moves in financial and stock markets, as they're related to the subprime mortgage issue," Japanese Vice Finance Minister Hiroki Tsuda said yesterday.

This story has been viewed 1647 times.
TOP top