COMMERCIAL Dollars embarrass Bank of Japan

Press, Volume CXII, Issue 33069, 9 November 1972, Page 20

COMMERCIAL Dollars embarrass Bank of Japan

(N.Z.P.A.-Reuter—Copyright) TOKYO, November 8. The Bank of Japan might issue its own bills to mop up part of the excess liquidity created by the heavy inflow of dollars into the country during recent weeks, official sources say.

Because of heavy selling of dollars on the Tokyo foreign exchange market, the Bank of Japan has had to buy a large amount of dollars during October at the intervention point of 301.10 yen on behalf of the foreign exchange account of the Finance Ministry. As a result, the issue of yen funds in payment for the dollars during October reached 480,000 m yen against the original estimate of 200,000 m yen, but it might well exceed this level because dollars are likely to continue to flow in.

Such a large increase in liquidity might lead commercial banks to intensify their lending, especially to smaller-sized industries, the sources say. It is also possible that surplus funds might be channelled into speculative investments in securities and real estate, they said. The inflow of dollars has particularly increased the liquidity of trade firms, shipbuilders and export industrial firms, reducing their dependence upon loans from commercial banks.

In addition, many industrial firms have issued, or plan to issue, new shares at current market prices or convertible debentures, to raise funds direct from the stock market.

The Bank of Japan has been absorbing excess liquidity by selling national bonds and commercial bills it held and withdrawing its own short-term loan issues to commercial banks.

The outstanding balance of its loan issues to commercial banks has substantially declined during the past year, so there is also a limit to such operations. In view of these factors, the bank might start selling bills issued by itself to mop up part of the liquidity. The system of the bank issuing its own bills was instituted last year to deal with such a situation. The measure was used last

year, but has not been employed so far this year in expectation of a gradual tightening of credit. Official sources, however, denied that the Bank of Japan has any plan to raise the reserve requirement ratios for commercial banks to cope with the present situation.

Interest in Indonesia

Marac Finance, Ltd, is considering taking a stake of up to 10 per cent in a multinational finance company that will help develop Indonesian industries and resources, Marac’s managing director (Mr J. D. Rose) disclosed yesterday on his return from Djakarta. The largest shareholder in Marac, Fletcher Holdings, Ltd, is already highly active in Indonesia as a consultant and potential joint venture partner. Mr Rose said Marac was waiting for the expected release next week of Indonesian finance ministry regulations. Mt Egmont warrant Meekatharra Minerals N.L.’s directors said in its September quarterly report that it has been granted a mineral prospecting warrant over 3868 acres at Mt Egmont. During August and September the company did not engage in any exploratory activity, and no exploration expenditure was incurred.