BOJ injects more cash into market
By Tomoko A. Hosaka |
March 18, 2011, Friday
|
Print Edition
Print Edition
JAPAN'S central bank injected more cash into jittery money markets yesterday as the yen shot to a record high.
The Bank of Japan injected an additional 6 trillion yen (US$76.7 billion) in same-day funds after the US dollar hit 76.25 yen in the morning, an all-time low in the aftermath of last Friday's magnitude-9 earthquake and tsunami. With same-day funds, banks in need can access cash immediately.
Driving the yen to unprecedented highs were predictions that big Japanese investors like insurance companies would repatriate funds from overseas en masse to cover the cost of tsunami damage to northeastern Japan, said Masafumi Yamamoto, chief foreign exchange strategist at Barclays Capital in Tokyo.
The repatriation hasn't happened yet, so the volatility is "highly speculative," he said. The market is now betting that the finance ministry and Bank of Japan will intervene to sell the US dollar and weaken the yen. A strong yen hurts Japan's exporters, potentially deepening the already severe hit to the world's No. 3 economy from the multiple disasters.
The latest offer of central bank funding came as stock markets turned south again. The Nikkei 225 stock average closed down 1.4 percent at 8,962.67 after plunging on Monday and Tuesday before partly recovering on Wednesday.
The Bank of Japan conducted emergency operations for the fourth day in a row, adding to the 55.6 trillion (US$688 billion) it provided money markets the previous three days. Of that figure, 28 trillion yen were same-day funds.
By flooding the banking system with money, it hopes banks will continue lending and meet the expected surge in demand for post-disaster funds.
Financial markets nervously monitored the rapidly changing situation at a crippled nuclear power plant in the northeast.
The crisis has triggered international alarm.
The Bank of Japan injected an additional 6 trillion yen (US$76.7 billion) in same-day funds after the US dollar hit 76.25 yen in the morning, an all-time low in the aftermath of last Friday's magnitude-9 earthquake and tsunami. With same-day funds, banks in need can access cash immediately.
Driving the yen to unprecedented highs were predictions that big Japanese investors like insurance companies would repatriate funds from overseas en masse to cover the cost of tsunami damage to northeastern Japan, said Masafumi Yamamoto, chief foreign exchange strategist at Barclays Capital in Tokyo.
The repatriation hasn't happened yet, so the volatility is "highly speculative," he said. The market is now betting that the finance ministry and Bank of Japan will intervene to sell the US dollar and weaken the yen. A strong yen hurts Japan's exporters, potentially deepening the already severe hit to the world's No. 3 economy from the multiple disasters.
The latest offer of central bank funding came as stock markets turned south again. The Nikkei 225 stock average closed down 1.4 percent at 8,962.67 after plunging on Monday and Tuesday before partly recovering on Wednesday.
The Bank of Japan conducted emergency operations for the fourth day in a row, adding to the 55.6 trillion (US$688 billion) it provided money markets the previous three days. Of that figure, 28 trillion yen were same-day funds.
By flooding the banking system with money, it hopes banks will continue lending and meet the expected surge in demand for post-disaster funds.
Financial markets nervously monitored the rapidly changing situation at a crippled nuclear power plant in the northeast.
The crisis has triggered international alarm.
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