The Bank of Japan (BOJ) has pumped in an additional ¥3.5 trillion ($43 billion, £27 billion) in the financial markets on Wednesday, the third day in a row since the devastating earthquake and Tsunami hit the country on Friday.
The latest move is the bank’s effort to shore up investor confidence in the Japanese financial system, which has seen bank inject ¥23 trillion ($284 billion) in total on the first two days of the week. The cash injection in the banking sector is meant to maintain adequate liquidity in the system.
The main Japanese stock index the Nikkei gained by 6% on Wednesday after witnessing massive drops amid sell-offs by foreign investors.
Analysts say the central bank’s decision to inject liquidity may also have been triggered by a rising Yen.
As overseas Japanese companies and insurers start sending money for the country’s reconstruction, the Yen has been appreciating against the US dollar. An excess supply of dollars weakens the greenback against the Yen.
A stronger Yen will make exports more expensive thus rendering them less competitive. It also affects the Japanese firms’ overseas profits when they are sent back and converted to Yen.
Yoshihiko Noda – the country’s finance minister said on Tuesday that his government is closely watching the price movement of the Yen closely.