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Market Operations in Fiscal 2019

August 25, 2020
Financial Markets Department
Bank of Japan

Introduction

During fiscal 2019 (April 1, 2019 to March 31, 2020), the Bank of Japan pursued powerful monetary easing under the framework of Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control.

Under the yield curve control, according to the guidelines for market operations decided at each Monetary Policy Meeting (MPM), 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. Based on the above, 10-year JGB yields remained at around 0 percent and the yield curve was formed in a manner consistent with the aforementioned guidelines throughout fiscal 2019.

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 in accordance with the guidelines for purchasing assets likewise decided at each MPM.

From the beginning of 2020, global financial and capital markets became increasingly unstable, with growing uncertainties over the global economy due mainly to the spread of the novel coronavirus disease (COVID-19). In response to this, the Bank conducted market operations in a flexible manner including unscheduled purchases of JGBs, in order to ensure stability in financial markets toward the end of March. At the MPM held on March 16, the Bank decided to enhance monetary easing through (1) the further ample supply of funds by conducting various operations including purchases of JGBs and U.S. Dollar Funds-Supplying Operations, (2) measures to facilitate corporate financing including the introduction of a new operation, and (3) active purchases of ETFs and J-REITs. The Bank conducted market operations in accordance with the above decision thereafter.

This paper elaborates on the market operations conducted by the Bank during fiscal 2019 based on the conduct of the monetary policy described above. The rest of this paper is organized as follows. Chapter II provides an outline of the Bank's market operations. Chapter III presents an overview of the developments in financial markets such as Japanese money markets and bond markets. Chapter IV describes the conduct of each measure in market operations. Chapter V discusses changes in the frameworks related to market operations. Finally, Chapter VI 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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