Bank actions to give market "a sense of relief"

Shirakawa: Central Banks' Liquidity Provisions Alone Won't Solve Crisis

Nikkei.com

1 December, 2011

TOKYO (Dow Jones)--

Bank of Japan Gov. Masaaki Shirakawa said Wednesday that coordinated central banks' action to shore up the global financial system was intended to give the financial market "a sense of relief," but that enhancing the liquidity provision alone is not an answer to solving the deepening European debt problem.

"The European debt problem can't be solved by liquidity provisions alone," Shirakawa said at a hastily arranged press conference.

"The step is meant to buy time for European countries to proceed with their fiscal and economic reform," he added.

The Japanese central bank chief also said the central banks from developed countries agreed to introduce the steps as the strains in the global financial market have risen over the past month.

Meanwhile, Shirakawa said knock-on effects on Japanese financial institutions "cannot be ruled out if concerns over European debt problem grow further." But he said that they have not yet faced dollar-funding problems.

The European Central Bank, the Federal Reserve, the Bank of Canada, the Swiss National Bank, Bank of England and Bank of Japan said they will lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points.

The move, effective Dec. 5, takes the new rate down to the U.S. dollar overnight index swap, or OIS, rate plus 50 basis points.