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Unsecured call money rate falls to 0.000%.

TOKYO, Oct. 10 Kyodo

The weighted average of Japan's key unsecured overnight call money rate fell to 0.000% for the first time in four months Thursday, 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 0.001% Wednesday. It last dropped to 0.000% in late June.

The Bank of Japan's super-easy monetary policy, combined with its massive yen-selling interventions, 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 30 billion yen with an interest rate of minus 0.050%, they said. A below-zero rate means lenders pay interest to borrowers.

The foreign bank's yen holdings have grown due to the BOJ's interventions, and the holdings have surpassed the ceiling for making deposits at the central bank, they said.

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.

The overnight call money rate dropped to below zero on June 25 for the first time ever.
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Publication:Japan Weekly Monitor
Date:Oct 14, 2003
Words:212
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