Japan injects an extra $24B into its financial system
TOKYO -- Japan's central bank infused money markets for the third day in a row, pumping another $23.8 billion to sustain domestic liquidity amid the deepening U.S. financial crisis.
With its sixth injection this week, the Bank of Japan has added a total of $76.1 billion since the bankruptcy filing and sale, respectively, of Lehman Bros. and Merrill Lynch, two Wall Street giants.
The central bank has worked closely with U.S. and European counterparts, who have also flooded money markets with cash to ensure smooth lending among banks.
While the Bank of Japan has been quick to provide extra liquidity, it decided Wednesday to stay put on monetary policy and kept its key interest rate unchanged at 0.5%.
In a statement, the bank stuck with its description of economic growth as "sluggish against the backdrop of high energy and materials prices and weaker growth in exports."
Bank of Japan Gov. Masaaki Shirakawa reiterated that the lethargy will persist for the time being but the economy is likely to "return onto a sustainable growth path with price stability."
He also downplayed the impact of the recent turmoil on Japan's financial system and praised the Federal Reserve's $85 billion bailout of troubled insurer American International Group.
The Fed's rescue of AIG was the "right decision" and would help restore investor confidence after recent shake-ups on Wall Street.
Shirakawa acknowledged that Lehman's collapse would hurt Japanese banks, among the U.S. investment firm's biggest creditors. He added, however, that affected institutions should have ample funds to cover losses.
"I am not concerned that the recent events will destabilize the financial system in Japan," he said.
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