Last night’s U.S. market shock, plus today’s 3.4% drop in the Nikkei, prompted Japanese Prime Minister Yukio Hatoyama to throw money at the banks.
The Bank of Japan offered to provide two trillion yen (£14bn) in liquidity to financial institutions such as banks and brokerages against their collateral pooled at the BoJ, starting on Friday and ending on May 27.
It was the first move of its kind since December during Dubai’s sovereign debt scare and the biggest since December 2008 when the financial crisis sparked by the Lehman Brothers collapse in September that year emerged.
“The Bank of Japan aims to increase a sense of security in the markets by providing ample funds,” said BoJ official Yuichi Adachi.
It seems they’re scared that as Japanese capital pulls out of euros there may be a shortage of yen. But forget ‘liquidity’, here’s what they’re really scared of — a stronger yen as Japanese money unwinds out of euros: