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Call money rate falls below zero for 1st time in 4 months.

TOKYO, Oct. 14 Kyodo

The weighted average of Japan's key unsecured overnight call money rate fell below zero for the first time in about four months Tuesday, reflecting excess liquidity in money markets, traders said.

The overnight call money rate, which banks charge each other for overnight loans and which serves as a benchmark short-term rate, stood at minus 0.003% Tuesday, down 0.004 point from last Friday. It last dropped below zero June 27.

The Bank of Japan's ultra-easy monetary policy, combined with its massive yen-selling interventions, has resulted in an overabundance of money, allowing market participants to obtain yen-denominated funds without paying interest rates, the traders said.

The day's fall in the call money rate was triggered by a foreign bank lending 90 billion yen with an interest rate of minus 0.10% to minus 0.05%, they said. A below-zero rate means lenders pay interest to borrowers.

Foreign banks often have to offload their excess yen holdings above a certain limit, even at the expense of paying interest on the loans to the borrowers, due to a rule required by their parent banks at home.
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Publication:Japan Weekly Monitor
Date:Oct 20, 2003
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