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Bank of Japan policymakers were highly wary of the impact of the Greek financial crisis on the Japanese economy, according to detailed minutes released Friday for the extraordinary meeting of the BOJ Policy Board on May 10, 2010.

The board members, concerned about global stock market drops triggered by the eurozone crisis, decided at the meeting to join the five-way dollar liquidity swap line arrangements that were formed among central banks in the West.

“It is an urgent priority for us to prevent (the financial crisis) from spreading to the domestic market at all costs,” then BOJ policymaker Tadao Noda said at the meeting.

The crisis was triggered when a change in government in Greece in October 2009 led to revelations of massive government debts in the country that had been underreported. The debt crisis soon spread to Portugal, Spain and other nearby countries, heightening the “sense of caution regarding sovereign risk,” according to then BOJ Gov. Masaaki Shirakawa.

The board’s May 10 meeting was against the backdrop of risk aversion accelerating.

Although measures by the European Central Bank and others had helped quell market confusion once, then policymaker Miyako Suda said, “The problem is worsening and spreading.” She added, “The markets may continue to repeatedly show volatility.”

“The effects on the yen’s exchange rates are limited so far, but we need to keep a close eye on them,” said then BOJ Deputy Gov. Hirohide Yamaguchi, who chaired the meeting on Shirakawa’s behalf.

The European debt crisis eventually made its way into Japan through the foreign currency exchange market, and the administration of then Prime Minister Naoto Kan decided in September that year to carry out yen-selling, dollar-buying market interventions. The move, implemented for the first time in six and a half years, was regarded as a means of last resort for the government.

The BOJ releases detailed minutes of Policy Board meetings from a decade earlier every six months.

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