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Bank Of Japan Joins Lending Rescue Package
by Stewart DouglasThe Bank of Japan has announced a cash injection for the banking industry to the tune of 1.6 trillion yen.
The move comes after similar steps by both the Federal Reserve in the US and the European Central Bank to intervene in floundering financial markets.
The Japanese central bank announced 1 trillion yen on Friday, with the further advance being unveiled today, in a bid to help with bank liquidity.
Experts had predicted a credit crunch of global proportions arising from the impact of the US sub-prime lending sector, with the further threat of recession around the corner as banks struggle to finance business growth and consumer mortgage lending.
The sub-prime lending sector, responsible for lending to those with poor credit history has been responsible for the financial crisis of many mortgage lenders, which has seen some of the biggest institutions driven to the cusp of bankruptcy in recent months.
After dubious lending across the board, spiralling mortgage defaults and repossessions have caused banks worldwide to tighten their own lending requirements, including inter-bank interest charges, which have made liquidity a problem.
The Bank of Japan’s measures today are expected to help inject more money within the Japanese banking sector, which should help ensure the economy is allowed to continue to grow at a healthy pace without the impact of a credit squeeze.
While global inter-bank lending is becoming more risky and hence expensive, the Bank of Japan is thought to be protecting its own economic interests by making more money available to its national banks.
With the threat of a credit crunch, and the profound knock-on effect of this on business growth and personal spending, both Japanese, European and US authorities seem eager to redress the current liquidity shortage through these substantial short term cash investment strategies.
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