Govt deal with US Fed Reserve provides more cash for banking system

SHOTLIST 1. Wide shot of press conference by the Governor of Bank of Japan 2. SOUNDBITE (Japanese) Masaaki Shirakawa, Governor of Bank of Japan: "With regards to the dollar-yen swap operation, like central banks of other nations, we decided to introduce a method to offer unlimited amount of dollars to banks at the fixed rate within the frame of appropriate collateral." 3. Cutaway of reporters 4. SOUNDBITE (Japanese) Masaaki Shirakawa, Governor of Bank of Japan: "Escalating strains in global financial markets have begun to affect our short-term money markets." 5. Wide shot of news conference STORYLINE: Japan's central bank said Tuesday it had expanded the scope of its agreement with the US Federal Reserve, allowing it to provide more cash to financial institutions to keep money markets operating smoothly. The Bank of Japan said it had revised a dollar-yen swap agreement with the Federal Reserve and will now offer an unlimited amount of dollars to banks and other financial institutions operating in Japan at a fixed rate against pooled collateral. The previous limit was 120 billion US dollars. The Bank of Japan Governor, Masaaki Shirakawa, emerged from an emergency policy board meeting on Tuesday night and said that the escalating strains in global financial markets had begun to affect Japan's short-term money markets. However, he said Japan's overall financial system remains stable and that he sees no need to guarantee all bank deposits or their debt. The BOJ also left its main short-term interest rate unchanged at 0.5 percent. The announcement brings Japan's central bank in line with its global peers. On Monday, the European Central Bank, the Bank of England, the US Federal Reserve and the Swiss National Bank jointly announced they would also offer unlimited short-term dollar funding. The moves are part of an effort by the global central banks to keep cash flowing in money markets by providing a steady source of dollars. On monetary policy, Shirakawa reiterated that each central bank should act based on local economic conditions. At previous policy-setting meeting a week earlier, the Bank of Japan kept to the status quo, choosing to sit out of a coordinated rate cut in North America and Europe. Speaking shortly after US authorities unveiled a government plan to spend 250 (b) billion dollars to buy stock in private banks, Shirakawa said it was the right step. You can license this story through AP Archive: http://www.aparchive.com/metadata/youtube/bbcd2122cf2c07a47c113ab82efca992 Find out more about AP Archive: http://www.aparchive.com/HowWeWork