BANK OF JAPAN DETERMINED TO KEEP EASY MONEY POLICY
The Bank of Japan bought 100 billion yen
in certificates of deposit (CDs) via repurchase agreements
today to show its determination to maintain an easy money
policy, central bank officials said.
    "Today's CD buying operation was designed to seek an
announcement effect, in which we would reassure the market of
the fact that we have not changed our policy stance," a senior
central bank official told Reuters.
    The bank also bought 400 billion yen in two-month
commercial bills to smooth out tight credit conditions in the
interbank market today, the officials said.
    The central bank was concerned about growing market
expectations of higher interest rates, which were in part
responsible for the recent plunge in stock and yen bond prices,
the officials said.
    But money traders said the market generally shrugged off
the bank's CD operation because it was small and at a rate far
below prevailing market rates. The rate on the key three-month
CDs in the primary market was 4.08/00 pct, while the bank's bid
was 3.75 pct, they said.
    The bank's bill buying operation also had little impact
because it was regarded as a routine operation, they said.
    The money traders said they regarded the central bank's CD
buying operation as simply a gesture to live up to Japan's
pledge to guide interest rates lower and stimulate the economy.
    "We did not expect the central bank to ease its credit grip
any further," a bank manager said, adding that the prevailing
market expectation of higher rates will remain.
    "If this is the case, the three-month CD rate will stay
above four pct for the time being," he said.
 REUTER
