BOJ seen having hard time steering market rates

TOKYO, Sept. 26 Kyodo - The Bank of Japan pumped 1.5 trillion yen into the money market Friday only to
absorb 300 billion yen later, indicating that the central bank was having a
hard time finding appropriate liquidity levels to steer market rates.

The BOJ injected the funds into the Tokyo money market in two same-day
liquidity-supplying operations by early afternoon Friday. It was the eighth
straight business day of emergency operations to prevent short-term interest
rates in interbank borrowing from excessively rising.
But only about an hour after the second round of the injection operation, the
bank carried out a fund-draining operation to take out 300 billion yen.
The central bank tweaked the amount of funds in the money market by the
absorbing operation to prevent borrowing costs from declining too much, BOJ
officials said.
The fund-injection operations were implemented as overnight rates offered by
Japanese banks on borrowing by foreign banks fetched 0.6 to 0.7 percent, well
above the BOJ's official target of around 0.5 percent.
Similar rates offered for Japanese banks remained around 0.4 percent.
With Friday's operations, the total amount of liquidity the central bank has
provided since the bankruptcy of major U.S. investment bank Lehman Brothers
Holdings Inc. on Sept. 15 came to 16.2 trillion yen.