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Market Operations in Fiscal 2018

July 19, 2019
Financial Markets Department
Bank of Japan

Introduction

During fiscal 2018 (April 1, 2018 to March 31, 2019), the Bank of Japan pursued powerful monetary easing under Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control. Under yield curve control, the Bank applied a negative interest rate of minus 0.1 percent to the policy-rate balances in current accounts held by financial institutions at the Bank as the short-term policy interest rate. Regarding the long-term interest rate, the Bank purchased Japanese government bonds (JGBs) so that 10-year JGB yields would remain at around 0 percent. Aside from JGBs, the Bank purchased a wide range of assets, including exchange-traded funds (ETFs), Japan real estate investment trusts (J-REITs), CP, and corporate bonds.

Meanwhile, at the Monetary Policy Meeting (MPM) held on July 30 and 31, 2018, the Bank, with a view to strengthening the framework for continuous powerful monetary easing, decided to enhance the sustainability of QQE with Yield Curve Control. Specifically, regarding the long-term interest rate, the Bank stated, "the yields may move upward and downward to some extent mainly depending on developments in economic activity and prices. With regard to the amount of JGBs to be purchased, the Bank will conduct purchases in a flexible manner so that their amount outstanding will increase at an annual pace of about 80 trillion yen." As for purchases of ETFs and J-REITs, the Bank stated, "with a view to lowering risk premia of asset prices in an appropriate manner, the Bank may increase or decrease the amount of purchases depending on market conditions."

This paper explains market operations conducted under QQE with Yield Curve Control during fiscal 2018, including those based on the measures to strengthen the framework for continuous powerful monetary easing. First, it outlines the guideline for market operations and the conduct of market operations by the Bank, followed by an overview of developments in domestic money and bond markets under the conduct of these market operations. Then, it describes the conduct of each measure in market operations and discusses changes in the frameworks related to market operations. Finally, the paper presents the Bank's actions to enhance dialogue with market participants.

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Financial Markets Department, Bank of Japan
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