BoJ withdraws funds as credit fears ease

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TOKYO, Aug 14 (AFP): The Bank of Japan (BoJ) moved today to withdraw billions of dollars of emergency funds from the banking system after a degree of calm returned to jittery global markets.
With global stock markets showing signs of stabilising after their recent rollercoaster ride, Japan's central bank said it would drain the 1.6 trillion yen (13.6 billion dollars) it had injected into the money market since Friday.
Japanese share prices closed slightly higher today as investors took the news in their stride, while bourses elsewhere in Asia saw mixed performances after Wall Street ended steady overnight.
The BoJ move would be taken by markets "as a message that there is no need to panic, that the short-term money market in Japan is stable," said Masamichi Adachi, senior economist at JP Morgan.
"I believe the financial situation will continue to calm down and will not have a significant effect on the real economy. However, we have to wait for a few more days to see what happens," he said.
In tandem with the US and Eurozone central banks, the BoJ had pumped funds into the banking system for two business days-including one trillion yen Friday-to ensure commercial banks had ample liquidity to do business.
That move pushed the central bank's unsecured overnight call rate well below its target of 0.5 per cent, suggesting there was ample liquidity.
The liquidity squeeze has been felt most in dollar money markets and not the Japanese banking system so the BoJ had decided that it would be appropriate to take out some of the funds, said Adachi.
The European Central Bank (ECB) injected another 47.66 billion euros (65.06 billion dollars) into the Eurozone banking system Monday while the US Federal Reserve pumped in two billion dollars.
Investors in Tokyo reacted calmly to the central bank's decision to withdraw funds.
The Tokyo Stock Exchange's benchmark Nikkei-225 index of leading shares gained 44.56 points or 0.27 per cent to end at 16,844.61.