BoJ unveils new steps to ease strains

Tokyo: The Bank of Japan (BoJ) unveiled steps to ease strains in financial markets, including widening the type of collateral it accepts in its market operations, to stay on guard against market turmoil despite a record surge in share prices inspired by a chorus of international measures.

At an extraordinary policy-setting meeting on Tuesday, the BoJ said it would broaden the range of asset-backed commercial paper eligible for its market operations until the end of April 2009, while it kept its key overnight call rate target unchanged at 0.5 per cent.

The central bank also said it would enhance its dollar-fund supply operations so that it can provide an unlimited amount of dollars against pooled collateral at a fixed rate.

The move, along with government steps to stabilise the nation's financial system, came amid increased risk of volatile stock market moves and credit problems in US and European banks hurting Japan's banking sector.

BoJ Governor Masaaki Shirakawa, however, signalled anew that the Jap-anese central bank would hold off on cutting interest rates even as its counterparts around the globe ease their grip on credit.

"Each nation should conduct monetary policy based on its own economic conditions," Shirakawa told a news conference after the extraordinary policy meeting.

Tokyo's Nikkei share average surged more than 14 per cent yesterday, the biggest one-day gain in its 58-year history though far short of last week's 24 per cent loss.

Among the steps the government announced before the stock market opened was a possible injection of public funds into regional banks that it said would be aimed at enhancing smooth financing for smaller firms facing a possible credit crunch.

Finance Minister Shoichi Nakagawa said Japan's financial system was relatively stable.

But he added: "I will continue to monitor on a heightened alert the impact of the recent rapid fall in the stock markets on Japan's financial sector and real economy."