Japan's central bank raises target for excess cash in system

TOKYO (AP) - Japan's central bank raised its target for extra cash in the financial system by 3 trillion yen (US$26 billion) Tuesday to calm a jittery stock market. 

The Bank of Japan decided at a two-day policy board meeting that began Monday to raise the target for excess cash flow to between 27 trillion yen (US$231 billion) and 30 trillion yen (US$256 billion), up from between 22 trillion yen (US$188 billion) and 27 trillion yen (US$231 billion). 

The move follows the government's decision over the weekend to pump public funds into money-losing Resona Bank, the nation's fifth-biggest bank, to avert a financial crisis. 

Resona has not gone bankrupt, but officials say its capital is too low to keep running as a bank. 

The central bank also cited worries about the SARS outbreak, a respiratory illness that is expected to slash economic growth in the region. 

The Bank of Japan sets the cash target for the accounts held there by commercial banks to allow more money to flow through the system and prod reluctant banks to lend more. 

The excess money is aimed at helping recovery at a time when the nation has been fighting lagging exports, flat consumer spending, high unemployment and declining share prices. 

The bank did not increase purchases of Japanese government bonds, another way it has to raise the cash flow in the system. 

The bank has kept interest rates at virtually zero since 2001. 

The bank said there were concerns about the volatile foreign exchange market, where the dollar has been falling lately.  

An overly weak dollar hurts Japan because its top companies are big exporters.  

A weak dollar tends to lower the value of overseas earnings of Japanese companies. 

Most analysts had expected the bank to keep policy settings steady because markets had recovered much of their losses in trading Tuesday.  

The bank raised the target for extra cash by 5 trillion yen (US$43 billion) at a previous meeting in April. - AP 

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