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To: Jon K. who started this subject	1/29/2003 8:50:42 AM
From: Softechie	of 29601

BOJ Official: Closely Watching Money Mkt Sub Zero Rates 29 Jan 01:08 TOKYO (Dow Jones)--The Bank of Japan is closely monitoring the country's domestic money market following a fall below zero in certain short-term rates, an official at the central bank's financial markets department said Wednesday. The BOJ is watching for any impact the negative rates have on financial markets, but so far is unsure how markets will be affected. Since Friday, unsecured overnight call rates have at times traded at -0.01%. The deals in which money was lent at negative rates were struck among foreign banks who are able to lend profitably at negative rates as they can access yen-denominated funds at wider negative rates in the foreign exchange swap market. According to market participants, foreign banks have recently been able to raise short-term yen funding for as low as -0.08%. Foreign banks usually choose to deposit their excess funds at accounts with the BOJ, which offers a zero interest rate. Traders say some foreign banks have filled their credit line to the BOJ and have lent money through the domestic market, leading to the sub zero rates. Yen-denominated short-term rates have fallen below zero in euroyen markets, but this is the first instance of domestic market rates falling into negative territory. It remains unclear whether such dealings will be short-lived, the official said. So far the volume of money traded at subzero rates is relatively small with the weighted average overnight call rate remaining above zero. The official wouldn't rule out the possibility of the weighted average rate falling below zero but said it may take some time. The central bank has since March 2001 held a quantitative easing policy that anchors short-term interest rates near zero and floods the financial system with ever larger amounts of cash. The central bank's target for this excess liquidity, known as the account balance, currently stands at Y15 trillionto Y20 trillion. -By Hiroshi Inoue, Dow Jones Newswires; 813-5255-2995; Hiroshi.Inoue@dowjones.com (END) Dow Jones Newswires 01-29-03 0108ET

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