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BoJ injects money to help calm crisis

BoJ injects money to help calm crisis
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First Published: Tue, Sep 16 2008. 10 09 AM IST
Updated: Tue, Sep 16 2008. 10 09 AM IST
By Mari Yamaguchi / AP
Tokyo: The Bank of Japan injected 1.5 trillion yen ($14 billion) into markets Tuesday as Japan scrambled to calm fears about a financial crisis after US investment bank Lehman Brothers filed for bankruptcy.
Financial Services Minister Toshimitsu Motegi sought to allay fears by saying the impact on Japanese financial institutions was limited.
“So far, we haven’t confirmed any signs that Japanese financial institutions are seriously affected,” he said, adding officials will “raise alert levels” to closely monitor the situation.
Japan’s central bank pumped 1.5 trillion yen ($14 billion) into money markets even before trading began to prepare for possible volatility in the wake of Monday’s news that Lehman had filed for bankruptcy protection in the United States. Its Japanese unit did the same on Tuesday.
Tokyo’s Nikkei 225 index plunged more than 5%, falling under than 12,000-point level for the first time since mid-March. The dollar also nose-dived to 104 yen levels.
With Monday being a holiday here, Tuesday was the first day for investors to react to the news about Lehman’s collapse, as well as news that Bank of America had taken over Merrill Lynch for about $50 billion.
The Bank of Japan issued a statement vowing to take measures to maintain stability in the country’s financial markets. Cabinet ministers, along with the central bank chief, were also holding an emergency meeting.
“The Bank of Japan will closely watch development surrounding the latest US financial institutions and its impact, and will continue to take appropriate measures to maintain smooth settlement and stability in the financial market,” Bank of Japan Gov. Masaaki Shirakawa said in a statement.
Lehman Brothers Holdings Inc., filed for Chapter 11 bankruptcy protection from its creditors on Monday. The 158-year-old investment bank was crippled by $60 billion in soured real-estate holdings and was unable to find an investment partner to throw it a lifeline.
Its Japanese unit also filed for bankruptcy protection at a Tokyo court Tuesday under the Japanese civil rehabilitation law, according to the office of Hiroyasu Ueda, lawyer representing the company, with debt totaling about 3.43 trillion yen (US$33 billion).
The size of the debt is the second-largest bankruptcy in Japan since the World War II, according to a think-tank Tokyo Shoko Research, Ltd.
Lehman Brothers Japan officials were not immediately available for comment Tuesday.
Actual exposure
Some of the Japanese lenders to Lehman Brothers said Tuesday that their actual exposure to Lehman would be little changed from their earlier projection or even smaller.
Aozora Bank Ltd., which is among the top lenders to Lehman, said its projected exposure could be “less than $25 million,” or “less than 6% of the $463 million exposure reported in Lehman bankruptcy filings, as it assumes “reasonable recoveries” against Lehman’s Japan unit and market pricing for recoveries against its US parent.
Another Japanese lender Chuo Mitsui Trust Holdings, Inc. said it has a total of 15 billion yen in loans to Lehman Brothers and its Japan unit, while regional Chiba Bank said it’s lending to Lehman totaled $47 million (4.98 billion yen), and will announce its impact on earnings projections.
On Monday, Japan’s financial watchdog ordered Lehman’s Japan unit to suspend operations. The agency said in a statement that Lehman’s Japanese operations, except those that involve returning assets to customers would be suspended for 12 days starting Monday.
The agency issued a separate statement ordering Lehman’s Japanese unit to take “full measures” to protect investors and assets after it filed for bankruptcy. The Japanese watchdog also ordered Lehman Brothers Japan Inc. to keep certain assets in the country.
Lehman opened its first office in Japan in 1973, and its Tokyo office is key for its global operations.
Citing data from the Japanese financial watchdog, Kyodo News agency said Lehman’s Japanese unit manages about 1.2 trillion yen ($11.4 billion) worth of assets from investors.
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First Published: Tue, Sep 16 2008. 10 09 AM IST