Japanese banks tap Fed for over $150b in just one week

Bloomberg

Japanese banks took almost $90 billion of cheap-dollar funding through the Federal Reserve’s enlarged swap lines on Tuesday, with total borrowings surpassing the record seen during the global financial crisis.
Including earlier operations on March 17 and 23, the lenders have gobbled up more than $150 billion of dollars, exceeding the amount seen in other nations with the revamped Fed swap lines.
A global liquidity crunch brought on by fears of a prolonged pandemic spurred the Fed to introduce a series of sweeping measures this month, from beefing up swap lines to Monday’s announcement to buy an unlimited of bonds. Japan hasn’t been spared, with companies rushing to sell a record amount of commercial paper last month to raise funds.
“Companies are bracing themselves for unexpected events in a move that has added to demand for dollars, and banks are likely working to get hold of enough funds,” said Hideyasu Ban, an analyst at Jefferies in Tokyo.
In recent quarters, Japanese banks have seen a growth in dollar deposits from corporate clients, but “it is now uncertain whether the money will stay in the deposit accounts because those clients are in need of dollars, so banks probably feel that they should try to procure as much funds as possible,” he said. Part of the reason for Japan’s unprecedented take-up of the swaps is the cheapness of the funds.
The 84-day swap operation on Tuesday, for which $73.8 billion was allotted, costs 0.35 percent.
That compares with 2% if the banks borrow the dollar against the yen in foreign-exchange markets.