Following the lead of several other central banks who announced similar moves yesterday, the Bank of Japan today said it would increase dollar lending by removing a previous ceiling of $120 billion.
The bank also cut fees on its Security Lending Facility from 1% to 0.5% until January 2009, and agreed to add floating-rate, indexed and 30-year government bonds to its list of acceptable collateral. It also promised more commercial paper repo auctions, and said it would accept a wider range of asset-backed commercial paper as collateral until the end of April 2009.
The news followed an unscheduled policy board meeting this evening in Tokyo.
With interest rates already at 0.5%, the Bank of Japan did not join in last week's coordinated rate cuts, but it said at the time that it would "examine possible ways to further enhance the effectiveness of monetary operations, including those pertaining to the BOJ reserve system". No changes to the reserve system have yet been announced.
Central banks around the world yesterday announced unlimited dollar lending, backed by swap agreements with the US Federal Reserve, in a move which appears to have reversed the steady rise of interbank rates - overnight Libor fell today for the second consecutive day, although it remains high at 3.75% for euros, 5.43% for sterling and 2.18% for dollars.
The news came after the closure of Japan's stock market, which rose 14.2% today to close at 9447.57.
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