The Bank of Japan's Policy Measures in the Current Financial Crisis

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

Monetary Policy Measures (more information)

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

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 conforms 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, and the expiration of outright purchases of CP and corporate bonds as scheduled. In order to ensure financial market stability toward the end of fiscal year, special funds-supplying operations to facilitate corporate financing would remain in effect until the end of March 2010, at which point they would expire. From April 2010 onward, the Bank would be prepared to provide 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 (more information)

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.

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Effects of Policy Measures on the Bank's Balance Sheet (more information)

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."

Since the fall of 2008, the Bank of Japan has introduced new funds-supplying operations and has expanded them, while continuing to provide substantial funds through existing operations.  These developments are reflected in the Bank's balance sheet.  With the implementation of various measures, the balance sheet expanded through the end of FY2008 (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.

As for the Bank's assets, receivables under repo and loans and discounts, which mainly consist of the amount outstanding of funds-supplying operations against pooled collateral and of special funds-supplying operations to facilitate corporate financing, 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 and operations utilizing corporate debt increased markedly through the end of FY2008 (Chart 2).  Among operations utilizing corporate debt, purchases of CP under repo 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 FY2008 (Chart 4 ).  The amount outstanding of U.S. dollar funds-supplying operations, which was introduced in September 2008 and then expanded, increased sharply through the end of 2008, but decreased thereafter as conditions of U.S. dollar funding market improved (Chart 5).

Collateral accepted by the Bank, which does not appear in the balance sheet, has been on an increasing trend (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 were provided under the U.S. dollar swap agreement with the Federal Reserve Bank of New York (NY Fed).  The Bank provided yen funds to the NY Fed in exchange for U.S. dollars.  These yen funds were deposited to the NY Fed's account held at the Bank, which was classified as "other deposits."

Statistics

(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)

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