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Change in the Guideline for Money Market Operations and Reduction in the Official Discount Rate

September 18, 2001
Bank of Japan

(For immediate release)

  1. At the Monetary Policy Meeting held today, the Bank of Japan decided to take the following measures.
    1. 1) Change in the guideline for money market operations (by majority vote)For the time being, the Bank will provide ample liquidity to the money market by aiming at maintaining the outstanding balance of current accounts held at the Bank at above 6 trillion yen.
    2. 2) Reduction in the official discount rate (by majority vote)Effective tomorrow, the official discount rate will be reduced by 0.15 percentage points to 0.10 percent.
    3. 3) Increase in the maximum number of business days for using the Lombard-type lending facility (by unanimous vote)As for the current reserve maintenance period, September 16 to October 15, the maximum number of days on which the official discount rate can be applied for use of the Lombard-type lending facility will be increased from five business days to ten business days.
  2. In response to a surge in demand for liquidity caused by the terrorist attacks in the United States on September 11, the Bank has taken every necessary measure, including a significant increase in the outstanding balance of current accounts held at the Bank exceeding eight trillion yen, in order to ensure smooth fund settlement and proper functioning of financial markets.
  3. In financial markets at home and abroad, disruption in transactions and settlements has so far been successfully avoided, reflecting ample liquidity provision by major central banks as well as appropriate responses by market participants.However, it is still necessary to carefully monitor the effect of the incident on global financial markets and economic activities.Should any event hamper smooth fund settlement or the functioning of financial markets, it could interrupt the permeation of monetary easing effects stemming from the policy measures taken so far.
  4. Against this background, the Bank found it appropriate to take the above measures in order to secure proper functioning of financial markets and to enhance the effective permeation of monetary easing effects.
  5. As the Bank has repeatedly stressed, in order to make monetary easing more effective and to bring Japan's economy back to a stable and sustainable growth path, it is indispensable that progress is made in the area of structural reforms with respect to the financial system as well as the economy and industry.From this viewpoint, the Bank strongly hopes that steady progress in structural reforms will continue overcoming the effect of the recent tragedy in the United States and various pains associated with structural reforms.
  6. The Bank will continue to make every effort as a central bank to prevent a continuous decline in prices and to establish a basis for the stable and sustainable growth of Japan's economy, including efforts to cope with the non-performing loan problem.

(Reference)

Meeting hours :
September 18th : 2:00 p.m. to 6:48 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)

From Cabinet Office:
Heizo Takenaka, Minister of State for Economic and Fiscal Policy
(from 2:00 p.m.)From Ministry of Finance:
Seiichiro Murakami, Senior Vice Minister of Finance
(from 2:00 p.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 Thursday, September 20, 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 Thursday, November 1, 2001