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The Bank of Japan's Policy Measures during the Financial Crisis

Outline

After the fall of 2008, when the turmoil in global financial markets intensified, the Bank of Japan implemented a wide range of policy measures on both the monetary policy and financial system policy fronts.

Monetary Policy Measures

The Bank implemented various monetary policy measures after the fall of 2008 in three main areas:

  1. Reductions in the policy interest rate
  2. Measures to ensure stability in financial markets
  3. Steps to facilitate corporate financing

Given that the outright purchases of corporate financing instruments, as part of the steps to facilitate corporate financing, essentially involve taking on the credit risks of individual private firms and as such are an exceptional measure for a central bank, the Bank established basic principles regarding the outright purchases of corporate financing instruments [PDF 34KB] before beginning to conduct the purchases.

On October 30, 2009, the Bank made the decisions on various temporary measures regarding money market operations ( Statement on Monetary Policy [PDF 20KB]). In order to ensure financial market stability and thereby facilitate corporate financing, it was necessary to adopt the most effective method for money market operations that conformed to changes in financial markets. Based on this understanding, the Bank decided the extensions of the effective period of expansion in the range of eligible collateral and the complementary deposit facility, while deciding the expiration of outright purchases of CP and corporate bonds as scheduled. In order to ensure financial market stability toward the end of fiscal 2010, special funds-supplying operations to facilitate corporate financing remained in effect until the end of March 2010. From April 2010, the Bank has been providing ample liquidity mainly through funds-supplying operations against pooled collateral, which accept a wider range of collateral.

Measures to Secure the Stability of the Financial System

With a view to securing the stability of the financial system, the Bank resumed its purchases of stocks held by banks. It also decided to provide subordinated loans to banks.

Effects of Policy Measures on the Bank's Balance Sheet

The implementation of measures listed above affects the Bank's balance sheet as well as the amount and composition of collateral it accepts. Changes in the Bank's balance sheet are shown under the title " Changes in the Bank's Balance Sheet and Collateral Accepted."

Monetary Policy Measures

1. Reductions in the Policy Interest Rate

Table : Reductions in the Policy Interest Rate
Date Target for
the Uncollateralized
Overnight Call Rate
Basic Loan Rate Rate Applied to
the Complementary
Deposit Facility
Releases
Feb.21,2007 Around 0.5% 0.75% -- [PDF 63KB]
Oct.31,2008 Around 0.3% 0.5% 0.1% [PDF 98KB]
Dec.19,2008 Around 0.1% 0.3% 0.1% [PDF 86KB]

2. Measures to Ensure Stability in Financial Markets

Table : Measures to Ensure Stability in Financial Markets
Contents Releases
Expansion of the securities
lending facility
Oct. 14, 2008 [PDF 12KB]
Feb. 19, 2009 [PDF 29KB]
Introduction and expansion of U.S. dollar
funds-supplying operations

Note: expired at Feb. 1, 2010
Sep. 18, 2008 [PDF 11KB]
Sep. 29, 2008 [PDF 11KB]
Oct. 14, 2008 [PDF 12KB]
Jan. 28, 2010 [PDF 10KB]
Re-establishment of U.S. dollar
funds-supplying operations
May 10, 2010 [PDF 56KB]
May 10, 2010 [PDF 34KB]
Expansion of the purchases of JGSs with
repurchase agreements
Oct. 14, 2008 [PDF 12KB]
Introduction of the complementary
deposit facility
Oct .31, 2008 [PDF 98KB]
Increase in outright purchases of JGBs Increased to 16.8 trillion yen per year:
Dec. 19, 2008 [PDF 86KB]
Increased to 21.6 trillion yen per year:
Mar. 18, 2009 [PDF 95KB]
Expansion in the range of JGBs accepted in
outright purchases
Dec. 19, 2008 [PDF 86KB]
Jan. 22, 2009 [PDF 48KB]
Introduction of outright purchases of JGBs
from specific brackets classified by bond
type and residual maturity
Dec. 19, 2008 [PDF 86KB]
Jan. 22, 2009 [PDF 48KB]
Inclusion of the Development Bank of Japan
as a counterparty in operations such as
CP repo operations
Dec. 19, 2008 [PDF 86KB]
Acceptance of debt instruments issued by
real estate investment corporations as
eligible collateral
Jan. 22, 2009 [PDF 65KB]
Inclusion of government-guaranteed
dematerialized CP in eligible collateral
Feb. 19, 2009 [PDF 51KB]
Expansion in the range of eligible collateralfor
loans on deeds to the public sector
Apr. 7, 2009 [PDF 51KB]
Acceptance of bonds issued by the governments of
the United States, the United Kingdom, Germany,
and France as eligible collateral
May 22, 2009 [PDF 42KB]
Provision of sufficient funds over the
year-end
Oct. 14, 2008 [PDF 12KB]
Provision of sufficient funds over the fiscal
year-end
 

3. Steps to Facilitate Corporate Financing

Table : Steps to Facilitate Corporate Financing
Contents Releases
Increase in the frequency and size of CP repo operations Oct.14,2008 [PDF 12KB]
Expansion in the range of ABCP as eligible collateral
Note: expired at the end of 2010
Oct.14,2008 [PDF 12KB]
Introduction and expansion of special funds-supplying
operations to facilitate corporate financing

Note: expired at the end of Mar. 2010
Dec.2,2008 [PDF 42KB]
Dec.19,2008 [PDF 86KB]
Feb.19,2009 [PDF 77KB]
Oct. 30, 2009 [PDF 97KB]
Expansion in the range of corporate debt as eligible collateral
Note: expired at the end of 2010
Dec.2,2008 [PDF 42KB]
Introduction of outright purchases of CP
Note: expired at the end of 2009
Dec.19,2008 [PDF 86KB]
Jan.22,2009 [PDF 34KB]
Oct. 30, 2009 [PDF 97KB]
Introduction of outright purchases of
corporate bonds

Note: expired at the end of 2009
Jan.22,2009 [PDF 34KB]
Feb.19,2009 [PDF 28KB]
Oct. 30, 2009 [PDF 97KB]

Measures to Secure the Stability of the Financial System

Stock Purchasing Plan

Table : Stock Purchasing Plan
Contents Releases
Suspension of selling stocks held by the Bank of Japan Oct.14,2008 [PDF 13KB]
Resumption of stock purchases held
by financial institutions
Note: expired at the end of Apr. 2010
Feb. 3, 2009 [PDF 73KB]

Provision of Subordinated Loans to Banks

Table : Provision of Subordinated Loans to Banks
Contents Releases
Provision of subordinated loans to banks
Note: expired at the end of Mar. 2010
Mar. 17, 2009
Apr.10,2009 [PDF 68KB]

Changes in the Bank's Balance Sheet and Collateral Accepted

After the fall of 2008, the Bank of Japan introduced new funds-supplying operations and expanded them, while continuing to provide substantial funds through existing operations.  These developments were reflected in the Bank's balance sheet.  With the implementation of various measures, the balance sheet expanded through the end of fiscal 2008 (March 2009).  In assessing the balance sheet, however, it should be noted that the expansion/contraction of the balance sheet and the degree of monetary easing do not always correspond.  For example, the outright purchases of CP may decrease when financial institutions feel less need to sell their CP to the Bank as the functioning of the CP market improves, and therefore a decline in the amount outstanding of outright purchases of CP does not necessarily imply monetary tightening.  Thus, it is necessary to comprehensively assess changes in the overall balance sheet or in an individual component of the balance sheet, taking into account financial market conditions.

The amount outstanding of Bank's assets increased with the Bank's provision of substantial funds ( Chart 1).

Regarding changes in the amount outstanding of individual operations, purchases of JGSs under repo agreement and operations utilizing corporate debt increased markedly through the end of fiscal 2008 (Chart 2).  Among operations utilizing corporate debt, purchases of CP under repo agreement increased initially to a large extent (Chart 3).  Thereafter, special funds-supplying operations to facilitate corporate financing were introduced and their amount outstanding increased accordingly.  The amounts outstanding of outright purchases of CP and outright purchases of corporate bonds, which were introduced in the beginning of 2009, rose until around the end of fiscal 2008 (Chart 4 ).  The amount outstanding of U.S. dollar funds-supplying operations, which were introduced in September 2008 and then expanded, increased sharply through the end of 2008, but decreased thereafter as conditions in the U.S. dollar funding market improved (Chart 5).

Collateral accepted by the Bank, which does not appear in the balance sheet, increased (Chart 6).  In particular, corporate debt, especially loans on deeds to companies, increased as the Bank introduced and expanded the operations utilizing corporate debt and expanded the range of corporate debt it accepted as eligible collateral (Chart 7).

As for the Bank's liabilities and net assets, current deposits increased with the provision of substantial funds (Chart 8 ).  Funds for U.S. dollar funds-supplying operations are provided under the U.S. dollar swap agreement with the Federal Reserve Bank of New York (NY Fed).  The Bank provides yen funds to the NY Fed in exchange for U.S. dollars.  These yen funds are deposited to the NY Fed's account held at the Bank, which is classified as "other deposits."

Statistics

The balance sheet and the amount outstanding of collateral accepted

Table : The balance sheet and the amount outstanding of collateral accepted
Statistics Contents
Bank of Japan Accounts (Every Ten Days) Developments in the balance sheet every ten days
Bank of Japan Accounts The amount outstanding of items of the balance sheet as of the end of each month
Collateral Accepted by the Bank of Japan The amount outstanding of collateral accepted as of the end of each month

The size and amount outstanding of various operations

Table : The size and amount outstanding of various operations
Statistics Contents
Money Market Operations Conducted by the Bank of Japan (Daily) Day-to-day operations and their results
Money Market Operations Conducted by the Bank of Japan (Monthly) A list of operations by month
Monetary Base and the Bank of Japan's Transactions Details of supply of funds and changes in the monetary base by month
Sources of Changes in Current Account Balances at the Bank of Japan and Market Operations (Final Figures) Changes in current account balances and in the size of market operations by month

Chart

Assets

Chart 1: Assets

Chart 1: Graphs of BOJ's assets by components. The details are shown in the main text.

Source Bank of Japan, "Bank of Japan Accounts."

Amount Outstanding of Short-Term Operations

Chart 2: Amount Outstanding of Short-Term Operations

Chart 2: Graphs of amount outstanding of short-term operations by components. The details are shown in the main text.

Source Bank of Japan, "Monetary Base and the Bank of Japan's Transactions."

Chart 3: Amount Outstanding of Operations Utilizing Corporate Debt

Chart 3: Graphs of amount outstanding of operations utilizing corporate debt by components. The details are shown in the main text.

Note Financial institutions can borrow funds by submitting corporate debt as collateral through funds-supplying operations against pooled collateral, in addition to the operations utilizing corporate debt. Developments in the amount outstanding of corporate debt accepted as collateral are shown in Chart 7.

Source Bank of Japan, "Monetary Base and the Bank of Japan's Transactions."

Chart 4: Amount Outstanding of Outright Purchases of Corporate Debt

Chart 4: Graphs of amount outstanding of outright purchases of corporate debt by components. The details are shown in the main text.

Source Bank of Japan, "Monetary Base and the Bank of Japan's Transactions."

Chart 5: Amount Outstanding of U.S. Dollar Funds-Supplying Operations

Chart 5: Graph of amount outstanding of U.S. dollar funds-supplying operations. The details are shown in the main text.

Source Bank of Japan, "Sources of Changes in Current Account Balances at the Bank of Japan and Market Operations (Final Figures)."

Collateral Accepted by the Bank of Japan

Chart 6: Total Amount of Collateral Accepted

Chart 6: Graphs of total amount of collateral accepted by components. The details are shown in the main text.

Note Corporate debt is the total amount outstanding of collateral that can be pledged for special funds-supplying operations to facilitate corporate financing.

Source Bank of Japan, "Collateral Accepted by the Bank of Japan."

Chart 7: Corporate Debt Accepted as Collateral

Chart 7: Graphs of corporate debt accepted as collateral by components. The details are shown in the main text.

Note CP excludes ABCP and CP issued by real estate investment corporations.

Source Bank of Japan, "Collateral Accepted by the Bank of Japan."

Liabilities and Net Assets

Chart 8: Liabilities and Net Assets
Chart 8: Graphs of liabilities and net assets by components. The details are shown in the main text.

Source Bank of Japan, "Bank of Japan Accounts."

Data for Charts

Table : Data for Charts
Date Contents Data
Dec. 15, 2010 Data for charts 1 to 8 [CSV 14KB]