Business | Banking
BoJ injects $29b in yen but lending stays dull
The Bank of Japan (BoJ) injected a total of $28.82 billion in yen into the money market via same-day funding operations on Tuesday, but over-night call rates stayed high as the end of the fiscal first half made banks even more cautious.
- Reuters
- Published: 00:02 October 1, 2008
Tokyo: The Bank of Japan (BoJ) injected a total of $28.82 billion in yen into the money market via same-day funding operations on Tuesday, but over-night call rates stayed high as the end of the fiscal first half made banks even more cautious.
The BoJ supplied a total of three trillion yen ($28.82 billion) - one trillion yen in the afternoon and two trillion yen in the morning - through the same-day operations, the 10th straight day of similar spot funding.
Call rates rose on strong demand from foreign players who were scrambling to find lenders.
This marked the third time the BoJ has injected a total of three trillion yen on a spot basis in a day since US investment bank Lehman Brothers' sudden failure in mid-September roiled money markets.
Japanese lenders have become extremely reluctant to lend to foreign financial institutions due to increased counterparty risks after Lehman's collapse.
Additional problems
On top of that, Tuesday was the last day of the Japanese fiscal first half when lenders typically stay sidelined, further drying out liquidity in the yen money market.
"The divergence in the money market will continue, with concerns remaining for European and US financial institutions," said Shinsuke Kanabu, joint general manager at money broker Central Tanshi, adding that the rejection of the US plan only delayed the recovery in market sentiment.
"The probability is high that the market has to continue relying on the BoJ's funding operations for cash," he said.
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