Japan, Australia Inject $15.7 Billion; HKMA Lowers Base Rate

Japan and Australia's central banks pumped more than $15 billion into money markets and the Hong Kong Monetary Authority cut interest rates to keep a credit crisis from spreading to the region. The Bank of Japan injected 1.5 trillion yen ($14.8 billion) and the Reserve Bank of Australia added A$1.21 billion ($856 million). Hong Kong's central bank will tomorrow calculate the base rate using a formula of the Federal Reserve's benchmark plus 50 basis points, cutting the city's rate to 2.5 percent from 3.5 percent, Chief Executive Joseph Yam said. ``It's a relief as central banks are trying to make an effort to stabilize the financial markets,'' said Keiko Onogi, a debt strategist at Daiwa Securities SMBC Co., one of the 24 primary dealers that are required to bid at government bond sales in Tokyo. ``It's better than nothing.'' Money market rates have jumped as lenders hoard cash, pushing the London interbank offered rate to 4.29 percent this week, the biggest premium over the Fed's benchmark since the central bank began using a target for the overnight federal funds rate between banks as its main tool around 1990. The world's major banks may need $675 billion in capital over the next several years to recover from the credit crisis, the International Monetary Fund said. Japan's overnight call loan rate fell to 0.53 percent after the operation at 9:20 a.m. in Tokyo, from 0.545 percent before the injection, according to Tokyo Tanshi Co. The BOJ has pumped about 23 trillion yen into the financial system over the past three weeks, the most in at least six years. The difference between the rate Australian banks charge each other for three-month loans and the overnight indexed swap rate rose to 83.5 basis points from 81 points yesterday. The gap has averaged 46 basis points this year.