The Bank of Japan sees no need to join a concerted plan by other major central banks to ease a global credit squeeze because the domestic financial system is solid, a spokesman said Thursday. The Federal Reserve and four other central banks announced a joint initiative Wednesday to tackle a credit crunch by pumping money into the banking system with a new system of loan auctions.
The Bank of Japan welcomed the plan but said there was no need for similar action in Asia's largest economy. "We are keeping in touch with the other central banks. We simply see no need to take special measures for the year-end as markets are functioning well through daily money market operations," the spokesman said.
Earlier this year the Bank of Japan pumped billions of dollars into the domestic financial system in tandem with other major central banks to calm markets after the subprime loan crisis erupted in late July.
But the BoJ later moved to siphon off excess funds amid ample liquidity. The Fed's joint initiative with the central banks of Canada, Britain, the eurozone and Switzerland is "designed to address elevated pressures in short-term funding markets," the US central bank said in a statement.
The BoJ said the move should help to shore up the global financial system. "The Bank of Japan welcomes these measures and hopes that they will contribute to maintaining the functioning of the international financial markets," it said in a statement late Wednesday. "Meanwhile, Japan's money markets function well and the Bank will continue to conduct money market operations so appropriately as to maintain market stability, including supplying sufficient funds over the year-end," it said.
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