BOJ Begins To Move Seriously To Drain Y2K Funds
Thursday, January 6, 2000
TOKYO (Nikkei)--The Bank of Japan drained a total of 3 trillion yen from the money market in two separate discount bill-selling operations Wednesday, selling 1.2 trillion yen in the morning and another 1.8 trillion yen shortly after noon.
With the year 2000 problem out of the way without any major disturbances, the central bank is now making a serious effort to siphon off the abundant funds that it supplied late last year to minimize the impact of Y2K-related troubles in the financial system, analysts explain.
Market participants say the BOJ is aiming to bring down by the end of the next week the daily fund surplus to about 5 trillion yen from the present 23.2 trillion yen.
In its market operations Tuesday afternoon and on Wednesday, the BOJ sold only bills. However, a BOJ official said that the central bank "will also sell short-term government securities in reverse gensaki transactions if the situation warrants in the future." In reverse gensaki deals, the BOJ sells government securities to buy them back later at agreed prices.
Banks and regional financial institutions had secured massive amounts of funds late last year because they expected large withdrawals as the year 2000 approached. But withdrawals were well short of forecasts, and lenders found themselves with ample funds on their hands.
As a result, banks have aggressively bid for the bills put on sale Wednesday by the BOJ. There were three times more bids than bills offered by the BOJ, and the highest yields on successful bids came only to around 0.03% to 0.04%.
"After paying commissions to money brokers, almost no investment profits will be made, but without any viable alternatives we had to bid for the bills," an official at a regional bank said.
(The Nihon Keizai Shimbun Thursday morning edition)
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