• Kyodo News

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The Bank of Japan said Monday it will redeploy a dollar-swap arrangement with the U.S. Federal Reserve as major central banks launch fresh coordinated action to ease strains in the global financial market resulting from the sovereign debt crisis in Greece.

The Group of Seven advanced economies hailed in a joint statement the emergency measures agreed to by the European Union to restore stability in the euro zone, underscoring “the need for exceptional action” to prevent shock waves from Greece spreading to the wider economy.

“We handled the financial turmoil in a solid manner,” Finance Minister Naoto Kan told reporters after the G7 issued the statement. With the promptly arranged rescue measures, he said, “stock and currency markets are likely to restore their stability.”

Tokyo will extend 360 million euro (some $465 million) in loans to Greece through the International Monetary Fund, which is set to provide 5.5 billion euro in support as part of the rescue package for the country, a Japanese official said.

The Japan-U.S. currency swap, through which the Fed would provide unlimited funds to the BOJ, is effective through January, the BOJ said after an emergency policy meeting.

The Fed is reaching similar bilateral accords with the Bank of Canada, the Bank of England, the European Central Bank and the Swiss National Bank.

The central banks receiving dollar funds will pour the money into domestic markets at a fixed interest rate for short-term funding, including overnight money loaned between banks and other financial institutions.

The first round of the operation will likely be held later this week.

The six central banks first established their currency-swap arrangements after the global financial turmoil intensified due to the collapse of Lehman Brothers Holdings Inc. in September 2008.

But they scrapped the arrangements last February after judging that financial markets have restored calm.

The latest move reflects fears of disruption in money markets, with demand for dollars rising as investors increasingly move out of the euro.

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