Bank of Japan official sounds alert over banks' overseas exposure

Tokyo

DEPUTY governor of the Bank of Japan Hiroshi Nakaso warned on Friday that the cost of dollar funds could spike upwards if the direction of monetary policy between the Bank of Japan and the US Federal Reserve continues to diverge, posing possible threats to Japanese banks.

A surge in Japanese banks' overseas lending has coincided with a rapidly strengthening dollar, and as the banks depend upon borrowing dollars or obtaining them in the swaps market to fund foreign-currency lending, they are in danger of being "squeezed" now, analysts say.