For the first time in history, the Bank of Japan will begin to offer U.S. dollar denominated loans to help stabilize the yen and USD cross, Bank of Japan Governor Masaaki Shirakawa announced Thursday morning.
Speaking to reporters in Tokyo, Shirakawa announced that the loans would range up to a maximum of $60 billion, be available to Japanese and foreign brokerages, and would be backed by collateral rigorously checked by the Bank of Japan. Each loan will not exceed three months in duration.
Shirakawa said the Bank of Japan's balance sheet would be unaffected by the move, and that the central bank is only concerned with the value of the yen against the greenback. He also said that against other currencies, the yen is stable.
He noted that trading in the money markets had increased, both at home and abroad.
On Thursday, the European Central Bank, the Bank of England, the Federal Reserve, the Bank of Japan and the Swiss National Bank announced co-ordinated actions to be taken to ease elevated tension in the short-term U.S. money markets.
By Erik Kevin Franco and edited by Stephen Huebl
©CEP News Ltd. 2008