BoJ calls for lowering reserve target
AFP, Tokyo
The Bank of Japan should consider gradually lowering its liquidity target range to reflect receding demand for funds from commercial banks, Atsushi Mizuno, a central bank policy board member, said Thursday. In the past banks have soaked up all the liquidity offered by the BoJ in its daily money market operations but as they have drastically reduced bad loans, their appetite for liquidity has also fallen. The bank has struggled to meet its daily target for liquidity injections since January, but has resisted the idea of lowering the target, which could be taken as an unwanted credit tightening when the economy is still wobbly. "In response to the declining demand for new funds, I think it would be better if current account target levels are lowered gradually," Mizuno said in a speech to an industry group in northern Japan. The bank's target for current account deposits has been at 30-35 trillion yen (276-323 billion dollars) since January 20, 2004, when the upper limit of the balance was raised to help accelerate Japan's exit from stubborn deflation.
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