TOKYO/SYDNEY - JAPAN, Australia and India flooded money markets with cash on Tuesday as central banks across Asia-Pacific sought to prevent the upheaval on Wall Street from clogging the pipes of the global financial system.

The region's banks dished out $17 billion (S$24.3 billion), following Monday's $70 billion (S$100.3 billion) Federal Reserve injection into the US money market, which seized up after Lehman Brothers collapsed to become the latest casualty of the 13-month old credit crisis.

Last weekend's dramatic events that also saw crisis-hit Merrill Lynch taken over by Bank of America and insurer American International Group scrambling to raise cash, increased bets on a Fed interest rate cut later on Tuesday.

The rates at which banks lend to each other jumped in South Korea and the financial hub of Hong Kong, while Asian stock markets, many of them closed for a holiday on Monday, tumbled and currencies whipsawed.

'I expect the BOJ to keep a generous funding stance for a while until market jitters subside,' said Mr Shinsuke Kanabu, joint general manager at money broker Central Tanshi.

Authorities across Asia said they were ready to act and Japan's central bank backed that up by injecting billions of dollars into the banking system.

'The Bank of Japan will carefully monitor the recent situation surrounding US financial institutions and its impact,' Governor Masaaki Shirakawa said in a statement.

The central bank, which begins a two-day rate review on Tuesday, pumped 1.5 trillion yen ($14.2 billion) into the money market, the biggest injection since March 31, pushing the overnight call rate slightly lower to 0.52 per cent.

Fed cut?
The Bank of Japan is expected to leave its benchmark interest rate unchanged at 0.5 per cent on Wednesday, with its banking system largely unscathed by the global credit squeeze triggered by US mortgage defaults.

In contrast, markets are pricing in an 88 per cent chance of a 25 basis point cut in the US benchmark rate to 1.75 per cent.

Economists, however, expect the central bank to express its readiness to cut rates swiftly if needed, but to stop short of lowering borrowing costs just yet. .

US markets appeared poised for another selloff on Tuesday after ratings agencies downgraded AIG's debt, complicating its battle for survival.

ECB pumps billions more into markets
The European Central Bank (ECB) pumped billions into the markets for a second day on Tuesday as it joined other central banks in trying to contain the fallout from the collapse of Lehman Brothers.

The Frankfurt-based bank said it had provided 70 billion euros (99.8 billion euros) from a one-day tender, a day after allotting 30 billion euros in an emergency operation to keep money markets well supplied with liquidity.

Other central banks have conducted similar emergency operations, with the US Federal Reserve providing 70 billion dollars and the Bank of England allotting 5.0 billion pounds (S$12.8 billion) on Monday.

Shockwaves from the Wall Street crisis prompted the Reserve Bank of Australia to pump nearly A$1.8 billion (S$2.15 billion) into the banking system, nearly three times as much as the market's estimated requirement, in its second injection in two days.

The Reserve Bank of India added almost 60 billion rupees (S$1.9 billion) through a refinance operation, its biggest injection in at least a month.

And China surprised markets on Monday with its first interest rate cut since 2002, seen partly as support the jittery stock and property markets Hong Kong, South Korea, Taiwan, New Zealand and Indonesia all offered verbal reassurances.

'We will take appropriate steps if we see fluctuations in the foreign exchange market,' South Korean Vice-Finance Minister Kim Dong-soo said.

The presidential Blue House has called a meeting of ministers to discuss the impact of the latest turmoil on the economy, a South Korean government source said, speaking on the customary condition of anonymity.

While the region's officials sought to calm markets and said their banking systems were robust enough to withstand the turbulence, they made clear there was more pain to come.

'As events in the United States demonstrated in the past 24 hours, regrettably, it has a long way to run yet,' Australian Prime Minister Kevin Rudd told parliament.