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Money Market Operations in Fiscal 2012

June 19, 2013
Financial Markets Department
Bank of Japan

Introduction

During fiscal 2012 (April 1, 2012 to March 31, 2013), the Bank of Japan continued to pursue powerful monetary easing through such measures as the virtually zero interest rate policy and purchases of financial assets.

Under the policy decisions made during the fiscal year, the Bank repeatedly increased the maximum amount outstanding of the Asset Purchase Program (APP), introduced in October 2010, on a significant scale from about 65 trillion yen to about 101 trillion yen at the end of 2013. The Bank also decided to further enhance monetary easing through the "open-ended asset purchasing method" from January 2014.

Through the money market operations conducted under these policies, the Bank made steady progress in terms of the APP with the fixed-rate funds-supplying operations against pooled collateral and purchases of various financial assets, such as Japanese government bonds (JGBs), treasury discount bills (T-Bills), CP, corporate bonds, exchange-traded funds (ETFs), and Japan real estate investment trusts (J-REITs). As a result, the amount outstanding of the APP increased from 48.9 trillion yen at the end of March 2012 to 67.1 trillion yen at the end of December 2012 against the ceiling of about 65 trillion yen. As the purchases were continued steadily, the amount outstanding of the APP reached 72.1 trillion yen at the end of March 2013.

This paper first explains the conduct of money market operations and developments in financial markets during fiscal 2012. It then discusses changes in the Bank's balance sheet as a result of the money market operations. Finally, the paper describes the conduct of individual measures for the money market operations.

At the beginning of fiscal 2013, the Bank decided on the introduction of "quantitative and qualitative monetary easing" at the Monetary Policy Meeting (MPM) held on April 3 and 4, 2013. With a view to pursuing quantitative monetary easing, the main operating target for money market operations was changed from the uncollateralized overnight call rate to the monetary base. The Bank decided to "conduct money market operations, so that the monetary base will increase at an annual pace of about 60-70 trillion yen." It also decided on an increase in JGB purchases and their maturity extension, as well as on increases in purchases of ETFs and J-REITs. Concurrently, the APP was terminated.

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