updated 12/26/2003 11:46:49 AM ET 2003-12-26T16:46:49

Japan's central bank has agreed to lend up to 10 trillion yen ($93.3 billion) to monetary authorities as a stopgap measure to cover an aggressive campaign to keep the yen from rising, the Finance Ministry said Friday.

The announcement was apparently intended to head off speculation the ministry may run short of money to intervene in currency markets. The government has bought billions of dollars this year in an effort to prevent a strong yen from hurting a recovery by the world's second-largest economy, which relies heavily on exports.

The Bank of Japan has agreed to buy foreign bonds from the ministry on three-month repurchase agreements to provide monetary authorities with up to 10 trillion yen in short-term funding if needed "to continue to respond flexibly to moves in the foreign exchange market," the ministry said in a statement.

The ministry will decide how many bonds to sell depending on "conditions in the currency market," an official said on condition of anonymity.

National lawmakers are set to approve an increase in the ministry's special foreign exchange account, which sets aside money for currency intervention, after Parliament reconvenes in January.

Analysts said the measures announced Friday were intended to dissuade financial markets from betting that monetary officials could face a shortfall pending that approval.

The Finance Ministry is "making sure that its arsenal is fully stocked, especially as it may need to intervene heavily over the year-end (and) New Year's holidays when speculators might use thin liquidity to push the dollar lower," Minoru Shioiri, foreign exchange manager at Mitsubishi Securities, told Dow Jones Newswires.

The government said it spent 17.8 trillion yen ($166.23 billion) on yen-selling operations in the first eleven months of 2003.

Some traders think the government might have about 5 trillion left ($46.69 billion) in the special account.

The dollar was trading at 107.08 yen on the Tokyo foreign exchange market at 5 p.m. Friday, down 0.10 yen from late Thursday.

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