Bank of Japan pumps US dollars

TOKYO - Reuters

A pedestrian walks past the Bank of Japan headquarters. The bank supplied $25 million for the market in a week. REUTERS photo

The Bank of Japan (BoJ) yesterday supplied dollars in market operations for the first time since last week’s coordinated action by the world’s top central banks aimed at giving banks easier access to the greenback as Europe’s debt crisis intensified.

The Japanese central bank supplied $25 million in an operation maturing in a week, five times the $5 million that it offered in four, one-week operations last month, but by no means large enough to signal funding strains.

“There was stronger demand because of the lower lending rate. But the amount of bids itself is not significant and suggests Japanese banks experimented with the scheme just in case necessity arises,” said Tomohiko Katsu, deputy general manager of the asset liability division of Shinsei Bank.

Three regional Japanese banks were chief bidders, securing $23 million, an interbank market source said.
The lending rate was at 0.6 percent, down from 1.08 percent in a previous one-week dollar auction on Nov. 29, but still above the one-week dollar LIBOR rate of 0.2 percent on Monday.

The Federal Reserve, European Central Bank and the central banks of Japan, Canada, Britain and Switzerland said last week they would reduce the cost of existing dollar swap lines by 50 basis points and extend the size and timing of the lines, to ease strains in financial markets.

The BoJ was the first of the central banks to offer dollars at the reduced rate. European central banks are set today to offer the first three-month dollar funds since the surprise joint action.