Bank of Japan pumps $43b in liquidity, largest amount since 2008

A rout in financial markets over the past week led to a scramble by banks and companies for dollar liquidity. PHOTO: AFP

TOKYO (REUTERS) - The Bank of Japan offered US$30.27 billion (S$42.98 billion) in its 84-day dollar funding operation, it said on Tuesday (MArch 17).

The take-up was the largest amount since the BOJ offered US$30.58 billion in 84-day dollar funding operation on Dec 2, 2008, during the market turmoil after the global financial crisis.

It also exceeded the US$17 billion offered by the Federal Reserve in its 84-day operation on Monday.

The BOJ's move came after the world's six major central banks took a joint step to provide more cash dollars on Sunday as a rout in financial market over the past week led to a scramble by banks and companies for dollar liquidity.

Yet, even after the Fed's emergency 100-basis-point rate cut over the weekend and the renewal of its quantitative easing program to increase cash in markets, there was little noticeable easing in the rush for dollar financing.

Funding constrains could ease gradually after big dollar injections from the BOJ and other central banks, said Yusuke Ikawa, Japan strategist at BNP Paribas.

"Today's results suggest that there are now abundant dollar cash at least among people who have access to the BOJ. The key point now is whether this money will spread to various companies and others that need them," he said.

In one possible sign of some easing in stress, the dollar/yen basis swap - the additional costs dollar borrowers need in short-term dollar/yen swaps - have eased to 91 basis points from high of 142 basis points on Monday.

The BOJ also supplied US$2.053 billion in a seven-day operation.

The BOJ has kept one-week dollar operation in place since the 2008 financial crisis. But in recent years, there had been very few takers of funds until last week.

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