Bank of Japan Holds Emergency Meeting

[Tachyon Flare]

An act of desperation ladies and gentlemen!

http://www.nzherald.co.nz/storydisplay.cfm?storyID=3300418&thesection=business&thesubsection=latest

Bank of Japan holds emergency meeting
25.03.2003

TOKYO - The Bank of Japan began a rare emergency policy-board meeting today to discuss ways to prop up the economy and financial markets ahead of fiscal year-end book-closings next week as hopes faded for a quick war in Iraq. Amid optimism for a more pro-active stance by new Governor Toshihiko Fukui, analysts expect the bank to tweak its monetary policy or pledge to buy more bank-held shares. Japanese media reported on Tuesday the bank was likely to expand its limit for buying shares directly from banks to three trillion yen ($24.8 billion) from the present two trillion. Bank data released today showed the bank had bought 1.03 trillion yen ($15.6 billion) of bank-held shares as of March 20.
The scheme is intended to shield financial institutions from stock market volatility. The Nihon Keizai Shimbun also said the bank would consider increasing its outright purchases of long-term government bonds and scrapping its self-imposed ceiling on bond buying, a move most analysts also expect the nine-member board to take. But more unorthodox steps, such as purchasing equity funds, real estate and foreign-currency-denominated bonds, to provide more liquidity to the money markets, are seen as unlikely.
The meeting started at 8:00 am (Japan time). It was unclear when the results would be announced.
- REUTERS

[Tachyon Flare]

http://news.bbc.co.uk/1/hi/business/2883395.stm

Bank of Japan holds war council

Top bankers in Tokyo have agreed to spend an extra trillion yen ($8.4bn; £5.3bn) on buying stocks from Japan's hard-pressed banks, in an attempt to defend the tattered financial system from the after-effects of the war in Iraq. The new governor of the Bank of Japan, Toshihiko Fukui, made the announcement - boosting the target for stock buying from 2 trillion yen to 3 trillion - after a double meeting of the BoJ's policy board. The decision should help prop up the banks, who face the end of the financial year on 31 March with their accounts ravaged by slumping stock prices and property valuations. But the move came from the regular board meeting, after an emergency meeting held immediately before failed to produce any special measures. "It is perplexing why they called an extraordinary meeting and then did nothing," said Richard Jerram, chief economist for ING Securities in Tokyo.
"It is a bit of a puzzle what they were doing. Fukui is not a dumb guy."

Debt

The Bank of Japan has already spent over 1 trillion yen on share buying in just four months, as figures released on Tuesday showed. Japan's banks hold about 25 trillion yen in shares, much from sister companies or companies to which they have loaned money.The problem is that - as the hundreds of trillions of yen in bad debts show - many of those companies are now in dire straits after the bursting of the stock market bubble and more than a decade of deflation. Japanese voters hoped Prime Minister Junichiro Koizumi would make radical change when they elected him two years ago. But little has happened, partly due to obstruction from members of his own Liberal Democratic Party who are in the pockets of industries which would be hit by economic reform. And some observers are now predicting the party could try to eject him later this year.

[Tachyon Flare]

The headlines are becoming more suspicious. Can you imagine where a headline says "Federal Reserve to buy more stocks but keeps monetary policy unchanged." Then again, the Federal Reserve is running J.P. Morgan and Citigroup (Along with many other financial institutions) in the hopes of averting a banking crisis. Interestingly, note that Minori Takeuchi is a J.P. Morgan analyst.

-Tachyon

Bank of Japan to buy more stocks but keeps monetary policy unchanged

March 25, 2003 5:03am

The Bank of Japan expanded a plan to buy shares from banks by a half amid concerns the war in Iraq could hurt the market, but it disappointed investors by keeping monetary policy unchanged.
In its first major decision under new governor Toshihiko Fukui, the central bank decided to lift its stock purchasing target to three trillion yen (25 billion dollars) from two trillion yen. However at an unprecedented monetary policy meeting earlier in the day, board members chose to maintain the BoJ's ultra-easy policy, dashing hopes they would vote to purchase more government bonds or start buying foreign assets. The BoJ simply pledged to provide further liquidity to the financial system if necessary as the war in Iraq rages. Eyes were now focused on the bank's next regular monetary policy meeting on April 7 and 8, with many analysts anticipating new measures will emerge to help support the world's second largest economy. "Against the background of more volatile stock prices in light of the military action against Iraq taken by the US and allied forces, the board has made this (extra share-buying) decision to encourage banks to make more efforts to reduce their exposure to market volatility," the BoJ said in a statement. Maximum stock purchases by the BoJ from each bank was also increased to 750 billion yen from 500 billion yen. The BoJ has already bought shares worth over one trillion yen under the scheme which was initiated late last year, and Fukui advised banks to sell all stockholdings to improve their balance sheets.
"However, we cannot do this with our stock-purchase scheme alone," he told a news conference, adding a government stock buying body should buy more. The increased target, which had already been reported by local media, caused little surprise for investors, who were still recovering from their disappointment after the BoJ maintained its monetary policy, dealers said. "The Bank of Japan is closely monitoring how the military action will affect the economy, especially through stock and foreign exchange markets," the central bank said after its one-day extraordinary policy board meeting.

"(It) stands ready to make every effort, including the additional provision of liquidity, to ensure financial market stability," it said in a statement. The target for the BoJ's current account -- funds which are made available to banks for lending -- was left at 15 to 20 trillion yen. It will be lifted by two trillion yen to between 17 trillion and 22 trillion yen from the start of April in a technical move to adjust for changes to the postal service, which holds vast amounts of Japanese savings. "At today's meeting policy board members were focusing more on diversification of operations, centring on government bonds," Fukui said. Investors predict fresh action from the BoJ is imminent, but many had expected something to emerge from the special meeting -- the first gathering of its kind since the central bank was given increased independence in April 1998. "There was a bit of disappointment," said Minori Takeuchi, foreign exchange analyst at JP Morgan Chase. The dollar was trading at 119.59-62 yen at 4:00 pm (0700 GMT) down from 120.52-55 yen in the morning. The Nikkei-225 average of the Tokyo Stock Exchange closed down 2.33 percent at 8,298.34 points.

Publication: Agence France Presse
Distributed by Financial Times Information Limited