Mumbai: The Bank of Japan (BoJ) left its key policy rate unchanged for the sixth month running, fearing a liquidity crisis, even as global markets went into a tailspin.

Investors had expected the BOJ to tighten its key interest rate by a quarter-point to 0.75 per cent.

BOJ governor Toshihiko Fukui said adjustments in financial markets would take time and he would closely watch the subprime mortgage crisis for any impact on US growth.

"I think it will take some time. Repricing of risk will probably lead to realisation of losses. The process could be painful," he said.

Central banks around the world have injected massive short-term funds into money markets in an attempt to alleviate the liquidity squeeze.

The European Central Bank's 40-billion-euro injection in three-month funds to the euro interbank money market failed to bring much relief to a market still hit by credit worries.

Some 146 banks bid at the first ever injection of three-month funds outside the ECB's normal monthly schedule, asking for a total of 125.8 billion euros in funding.

Stock markets, however, rallied as investors toyed with taking risk on board again. US stock futures opened higher and the pan-European FTSEurofirst 300 index rose for the fifth session in a row.

Asian stocks also rose after signs that US takeover activity could soon recover.

Investors, however, were still nervous with more casualties in the US home loan market and signs of wider economic damage.

Accredited Home Lenders Holding Co, Europe's largest bank HSBC Holdings and Lehman Brothers said they would slash a total of 3,400 jobs and close some operations as concern mounted about the longer-term impact on the economy.

Citigroup, Bank of America Corp and three other top banks borrowed more than $2 billion in total from the Fed, in a bid to reassure markets and remove the stigma of getting short-term financing from the central bank, even though they had ample access to funds elsewhere.