BOJ Joins Other Central Banks to Offer Dollars without Limits

Tokyo, Oct. 14 (Jiji Press)--The Bank of Japan on Tuesday decided to offer U.S. dollars without limits to the domestic short-term funding market, joining the U.S. Federal Reserve and three central banks in Europe.

The BOJ said that it will conduct dollar-supplying money market
operations at fixed interest rates against pooled collateral to help ease a
liquidity crunch on the interbank funding market.
The central bank decided on the step at an unscheduled Policy Board
meeting Tuesday night.
At a news conference, BOJ Governor Masaaki Shirakawa said strains
on the global financial markets are affecting the Japanese interbank market.
Meanwhile, he said that there is no change in the bank's stance of
considering reviewing its polity rate target based on domestic economic
conditions. At the board meeting, the BOJ decided to keep its target for the
unsecured overnight call rate, a key short-term interbank rate, unchanged at
around 0.5 pct.
In response to the recent steep falls in Japanese stock prices, the
BOJ also decided to suspend sales of its shareholdings on the stock market
for the time being from Wednesday.
The BOJ bought the shares from commercial banks between November
2002 and September 2004 under a program to help them cushion the impact of
stock price falls. The central bank started releasing the shares on the
stock market in October 2007 and was originally scheduled to complete the
share sale in 10 years.
Furthermore, the BOJ decided to add 30-year Japanese government
bonds, floating-rate JGBs and inflation-indexed JGBs to the list of eligible
JGBs for its repo operations for bond lending.
The BOJ will also start providing ample funds maturing beyond the
turn of the year at an early stage.
The BOJ on Monday expressed its intention to consider providing
dollar funds without limits to the money market in a statement issued
jointly with the Fed, the European Central Bank, the Bank of England and the
Swiss National Bank with the aim of overcoming the financial crisis, which
escalated after the collapse of U.S. investment bank Lehman Brothers in
mid-September.
The BOJ hammered out the string of measures after Shirakawa
returned home Tuesday afternoon after attending a series of international
financial meetings in Washington, including Friday's Group of Seven meeting
of finance ministers and central bank chiefs.
At the news conference, Shirakawa said that the Japanese financial
system is stable as a whole, adding that there is no need to for the
government to fully guarantee interbank fund transactions or bank deposits.
Meanwhile, Shirakawa said that the Japanese central bank is
studying the advisability of paying interest on funds deposited with the BOJ
by commercial banks under its reserve system. Such a step was announced by
the Fed earlier this month.
Shirakawa also said that the BOJ will consider when to resume the
sale of its shareholdings while examining stock market conditions in and
outside Japan.