BOJ Accelerates Draining Of Excess Money From Market
Saturday, January 15, 2000
TOKYO (Nikkei)--The Bank of Japan has begun to swiftly drain the excess reserve in the money market, following aggressive injections of year-end liquidity designed to contain any possible Y2K-related turmoil. On Friday, the central bank reduced the size of the excess reserve to 6.9 trillion yen, down 3.8 trillion yen from Thursday.
Market participants expect the BOJ to continue to take huge funds out of the banking system on Monday to bring the excess reserve close to 1 trillion yen, the level the BOJ had kept before Y2K fears became widespread in the market.
"Now that the Y2K-related confusion is over, the BOJ could have brought down (the level of excess reserve) to 1 trillion yen earlier this week," points out Shin Nagai, forex operations manager at ABN Amro Bank.
Many market participants believe that "the central bank has been extra cautious in not letting interest rates spike by draining funds out of the market too quickly," explains Izuru Kato of Totan Research Co.
However, a BOJ official insisted that "our draining move has not been slow. In fact, we are proceeding as planned."
The BOJ drained a massive amount of funds from the market this week even though the highest rate at which banks bought discount bills from the central bank in open market operations surged to 0.06%, compared to the 0.03% rate seen at the beginning of the year.
Market insiders have interpreted the BOJ's stance as an effort to contain speculation that the bank is expanding money supply ahead of the Group of Seven meeting of finance ministers to be held in Tokyo on Jan. 22.
In the meantime, the average rate on successful bids for one-year treasury bills that the Ministry of Finance auctioned Friday shot up to 0.255%, up 9.5 basis points from the December auction and the highest level since the ministry began auctioning the securities last April.
(The Nihon Keizai Shimbun Saturday morning edition)
|
