In June 2013, Chairman Ben Bernanke provided more comprehensive guidance about the criteria related to the decision to reduce the pace of asset purchases at the press conference.
The Bank decided to continue monetary easing through measures such as reductions in the short-term policy interest rate and the long-term interest rate, expansion in asset purchasesin terms of quality, and an acceleration of expansion of the monetary base.
この結果、当初35兆円程度の規模で開始した「資産買入等の基金」は、40兆円程度まで拡大しています。
As a result, the size of the Asset Purchase Program increased to about 40 trillion yen from the initial size of about 35 trillion yen.
In the future, if further ample liquidity is provided through the implementation of the asset purchase program that I will explain later, there might be days when the uncollateralized overnight call rate becomes substantially lower than 0.1 percent.
First, by linking the duration of asset purchases with the policy target and not specifying the time frame in advance, an open-ended approach indicates central banks' strong will and determination to achieve the target.
The monetary base has increased significantly as asset purchases by the Bank of Japan have progressed, and firms' funding costs have been hovering at low levels.
A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases.
While the policy decision to conduct market operations and asset purchases in a flexible manner in July last year was aimed at addressing the decline in market functioning, such conduct also has played a role in alleviating instability in financial markets since last autumn.
In this regard, taking into consideration the nature of QQE that I mentioned earlier, I think that it will be necessary at some point to examine the option of gradually starting to shift the focus of monetary policy conduct from the asset purchase policy to other policy tools.
Taking account of the existing financial system and financial market structures in Japan, we have come to a conclusion that the Bank of Japan can proceed with more powerful monetary easing by controlling the yield curve through the appropriate combination of a negative interest rate policy and asset purchases.
On this point, while continuing to enhance dialogue with market participants, the Bank will closely examine developments in financial markets and the effects of the Bank's asset purchases on financial markets by continuing to perform comprehensive analysis and monitoring.
Some members pointed out that the flexible conduct of market operations and asset purchases decided in July generally had been exerting the intended effects, given that indicators for the degree of liquidity and functioning of the JGB market had improved to some extent.
As for the expansion of eligible collateral, as the Bank continues its massive purchases of JGBs, the amount of eligible collateral of private financial institutions has been on the decrease. Expanding the range of eligible collateral will contribute to smooth asset purchases in the future.
Since the introduction of the Asset Purchase Program, financial conditions in Japan have become extremely accommodative both in historical and international comparison. In this sense, we believe that the Program has already achieved its intended effects.
In particular, for asset purchases, the total size has expanded from 5 trillion yen at the time of introduction to 45 trillion yen, and the purchase of long-term government bonds has increased substantially from 1.5 trillion yen to 29 trillion yen.
In addition to the Asset Purchase Program, the Bank regularly purchases JGBs(with the remaining maturity of up to 30 years, including that of one year or less) at the rate of 21.6 trillion yen per year to counterbalance the increased amount of banknotes in circulation.
The Bank maintained the virtually zero interest rate policy and repeatedly increased the maximum amount outstanding of the Asset Purchase Program, introduced in October 2010, on a significant scale from about 40 trillion yen to about 65 trillion yen.
In the meantime, at the Monetary Policy Meeting held on August 4, the Bank decided to enhance monetary easing by increasing the total size of the Asset Purchase Program by about 10 trillion yen: 5 trillion yen for the fixed-rate funds-supplying operation against pooled collateral and 5 trillion yen for asset purchases..
After exhausting conventional policy measures by lowering the policy rate virtually to the zero lower bound, central banks in advanced economies have been underpinning economic recovery in the wake of the recent global financial crisis by using unconventional policy tools, such as asset purchases and forward guidance.
The MHN model abstracts from the issues of an open economy and imbalances arising from financial intermediaries. Apart from forward guidance, the authors also do not consider the full range of unconventional monetary policy measures, such as asset purchases.
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