BoJ Injects Extra Funds For First Time In Three Days

Source : Channel NewsAsia, 16 August 2007

TOKYO - The Bank of Japan IPicture) pumped extra funds into the financial system Thursday for the first time in three days to try to stabilise interest rates as fresh havoc erupted on global financial markets.

The BoJ said it had injected 400 billion yen (3.4 billion dollars) into the money market after draining funds for two straight days.

The Japanese central bank's latest move came as the Tokyo stock market tumbled for a second straight day after another rout overnight on Wall Street, with the Nikkei-225 index going on to finish down almost 2.0 percent.

But analysts said that there was still no sign of a credit squeeze in Japan, where banks are believed to have taken less risks than overseas rivals.

"My understanding is that at the moment the BoJ is basically showing solidarity with other central banks rather than there being a pressing liquidity concern in Japan," said Jeremy Hall, a Japanese equity fund manager at Henderson Global Investors in Singapore.

The BoJ had pumped 1.6 trillion yen of emergency funds into the financial system over Friday and Monday as part of a concerted action by global central banks to try to avert a credit squeeze caused by problems in US mortgages.

On Tuesday and Wednesday the BoJ drained a total of 3.6 trillion yen from the domestic banking system as fears of a domestic credit squeeze faded.

Analysts said Japanese banks did not appear to be significantly exposed to the troubles in the US sub-prime mortgages to high-risk borrowers.

"It was an asset bubble which caused all the Japanese banks' problems from which they only emerged three years ago in terms of financial strength standing," said Hall.

"Therefore I think the idea that they have gone headlong into another financial bubble in a foreign country is probably quite unrealistic because these guys are fundamentally risk averse," he added.

Bank stocks ended narrowly mixed Thursday, recovering from steep losses earlier in the session.

Mizuho Financial Group finished down 10,000 yen or 1.5 percent at 666,000 while Mitsubishi UFJ Financial Group edged up 3,000 yen or 2.8 percent to 1.11 million yen.

A persistent housing slump and rising property foreclosures in the United States has sparked a financial storm that has prompted investors to shun mortgage-backed securities and other risky investments. - AFP /ls