Japan holds rate as Australian central bank prefers to cut

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: The Bank of Japan kept its benchmark overnight lending rate at 0.3 % on Tuesday at an emergency meeting in Tokyo, the central bank said in a statement. The Bank of Japan will accept lower- grade corporate bonds as collateral for loans to banks to help businesses get access to funds as the country's recession deepens, it said in a statement after an emergency meeting on Tuesday in Tokyo.

With benchmark rates approaching zero in Japan, Governor Masaaki Shirakawa is adopting other ways to support their economies. Lending to banks will increase by about 3 trillion yen ($32 billion) once both measures take effect, Shirakawa told reporters on Tuesday.

The cetral bank said it will provide funds to commercial lenders at the benchmark rate "for an unlimited amount against the value of corporate debt pledged." The types of debt accepted include bonds, commercial paper and discount bills.

Meanwhile, Australia's central bank also slashed its benchmark interest rate by one percentage point to 4.25% on Tuesday, extending the biggest round of reductions since 1991. Governor Glenn Stevens lowered the overnight cash rate target to a six-year low of 4.25% in Melbourne, the fourth reduction in as many months. Four of 21 economists surveyed by Bloomberg News forecast today's move and 15 tipped a three-quarter point cut.

Three percentage points of cuts since September save borrowers with an average A$250,000 ($159,000) home loan more than A$500 a month. Weighing up the international and domestic developments of recent months, the board judged that a further significant reduction in the cash rate was warranted now, to take monetary policy to an expansionary setting," Stevens said in a statement. While Australia's economy has been more resilient than "other advanced economies," recent evidence indicates that "a significant moderation in demand and activity has been occurring," he added.