(Short Note 1) New Steps for Monetary Easing: What is Significant?

March 19, 2001
Bank of Japan

New Procedures for Money Market Operations

• The same benefit of the "Zero Interest Rate Policy" can be expected while leaving room for a market mechanism
• Volatile interest rate fluctuation can be avoided by the "Lombard-Type" lending facility

Strong Commitment in terms of Policy Duration

• The new procedures continue until the CPI (excluding perishables) registers stably a zero percent or an increase year on year
• Affect people's expectation to remove a deflationary bias
• Fall in interest rates across the yield curve

More Effective Market Operations with a Clear Ceiling to Secure Discipline

• In order to provide funds smoothly, increase the amount of outright purchase of the long-term government bonds if necessary
• Secure the credibility of the monetary policy by establishing a ceiling for the purchase set at the outstanding amount of bank note issuance