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Change in the Guideline for Money Market Operations

August 14, 2001
Bank of Japan

(For immediate release)

  1. At the Monetary Policy Meeting held today, the Bank of Japan decided to change the guideline for money market operations.In addition, the Bank will increase its outright purchase of long-term government bonds in order to smoothly provide liquidity under the new guideline.
    1. 1) Change in the guideline for money market operations (by majority vote)
      The outstanding balance of current accounts held at the Bank of Japan will be raised from around 5 trillion yen to around 6 trillion yen (attachment).
    2. 2) Increase in outright purchase of long-term government bonds
      The amount of the outright purchase of long-term government bonds will be increased from the current 400 billion yen per month to 600 billion yen per month.
  2. Economic adjustments are deepening as industrial production is sharply declining due to a fall in exports.Risks are increasing for the adjustments to spread to wider areas as falling production is expected to cause an associated decline in domestic demand.Recent capital market developments at home and abroad may also adversely affect the real economy.A weaker demand could intensify downward pressure on prices in the coming period.
  3. Earlier this year, the Bank has taken monetary easing measures unprecedented in the history of central banking, with firm determination to prevent a continuous decline in prices and to form a basis for sustainable economic growth.Consequently, ample liquidity has been provided to financial markets and interest rates have declined to extremely low levels.
    However, given the adverse recent and prospective developments regarding growth and prices, the Bank considered it appropriate and necessary to further strengthen monetary support for economic recovery under the new framework established in March.
  4. The Bank will continue to make every effort as a central bank to support Japan's economy so that it could return to a stable and sustainable growth path.
  5. However, given economic developments worldwide and the seriousness of confronting problems, it is not an easy task to revitalize Japan's economy.Progress in structural reforms is indispensable for monetary easing to exert its full potential, which would help restore Japan's economy to a stable and sustainable growth path.
  6. In this regard, it is encouraging that concrete steps for reforms have started to take place under the strong leadership of the government.A series of monetary easing measures, including today's decision, is consistent with providing maximum support for such reform efforts in various areas.The Bank of Japan strongly hopes that the government and the private sector will make further steady progress in structural reforms, while overcoming associated short-term pains.

Attachment

August 14, 2001
Bank of Japan

At the Monetary Policy Meeting held today, the Bank of Japan decided, by majority vote, to set the following guideline for money market operations for the inter-meeting period:

The Bank of Japan will conduct money market operations, aiming for the outstanding balance of current accounts held at the Bank at around 6 trillion yen.

Should there be concern for financial market instability such as a rapid surge in liquidity demand, the Bank will provide ample liquidity irrespective of the above guideline.

(Reference)

Meeting hours :
August 13th : 2:00 p.m. to 4:19 p.m. August 14th : 9:01 a.m. to 1:04 p.m.

Members present :
Masaru Hayami (Governor)
Sakuya Fujiwara (Deputy Governor)
Yutaka Yamaguchi (Deputy Governor)
Toshio Miki
Nobuyuki Nakahara
Kazuo Ueda
Teizo Taya
Miyako Suda
Shin Nakahara

(Others present)

August 13th:From Cabinet Office:
Kazumasa Iwata, Director General for Economic Assessment and Policy Analysis
(from 2:00 p.m.)

From Ministry of Finance:
Hideto Fujii, Deputy Vice Minister for Policy Planning and Co-ordination
(from 2:00 p.m.)

August 14th:From Cabinet Office:
Heizo Takenaka, Minister of State for Economic and Fiscal Policy
(from 9:01 a.m.)

From Ministry of Finance:
Hideto Fujii, Deputy Vice Minister for Policy Planning and Co-ordination
(from 9:01 a.m.)

Release of Monthly Report of Recent Economic and Financial Developments:
(Consisting of "The Bank's View" and "The Background")
Japanese version of the entire report and English version of "The Bank's View"
2:00 p.m. on Wednesday, August 15, 2001
English version of "The Background"
With in a few business days from the release of"The Bank's View"

Release of minutes :
2:00 p.m. on Tuesday, September 25, 2001