The Bank of Japan pumped 500 billion yen into the short-term money market Thursday in its first emergency fund provision in about four months as it feared banks' reserves at the central bank would fall below its liquidity target.
The action is intended to demonstrate the BOJ's determination to keep its super-loose monetary easing policy intact to combat deflation, market sources said.
It is also meant to nip in the bud any financial market disruption prior to the abolition of unlimited refund guarantees on liquid deposits on April 1, they said.
The BOJ took action as it was worried that the outstanding balance of current-account deposits held by commercial banks might have sunk below 30 trillion yen Thursday.
The central bank has flooded the financial market with liquidity with the aim of keeping the outstanding balance of deposits in a range of 30 trillion yen to 35 trillion yen.