The Bank of Japan's decision Monday for a dollar-swap accord with the U.S. Federal Reserve was welcomed by analysts, who said pumping liquidity into the banking system and helping businesses raise necessary funds are crucial to keeping Japan's economic recovery on track.
The BOJ decided on its commitment for the Fed's program to provide dollars to major central banks under bilateral swap accords. The recipient banks would in turn inject the liquidity into domestic money markets, where demand for dollars sharply rises as investors dump euros due to fears the sovereign debt crisis in Greece could escalate.
"Everybody might have thought they were seeing another Lehman shock," said Masamichi Adachi, senior economist at JPMorgan Securities Japan Co., who added such fears appear to be subsiding and called the coordinated action by the central banks "significantly rational."