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Dollars come cheaper in Japan as last year's fever fades

Banks curb buying of foreign bonds, bulk up greenback deposits

TOKYO -- Japan's financial institutions are paying less to borrow dollars as foreign-bond investment tapers off and banks lock down their own sources of the currency, correcting market distortions brought on by a severe shortage of greenbacks late last year.

The spread on one-year cross-currency basis swaps between yen and dollars, a measure of Japanese banks' dollar-financing costs, has remained on the level of 40 basis points since late March. This is the narrowest since September 2015, and around half the 80 basis points or so seen at the end of November -- the widest spread since the 2008 financial crisis.

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