Money Market Operations in Fiscal 2003^*1

• *1The Japanese original was released on May 26, 2004.

August 31, 2004
Financial Markets Department

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In fiscal 2003, the Bank of Japan changed the target level for current account balances held at the Bank five times, raising it by 15 trillion yen in total. To achieve the target and maintain stability in the money market, the Bank conducted money market operations appropriately by carefully monitoring money market conditions and market participants' bidding in response to the Bank's operations. Autonomous factors such as the flow of treasury funds and banknotes contributed to the increase in current account balances. In such a situation, the target level for current account balances, which had been raised significantly, was steadily achieved and the money market remained generally stable throughout the fiscal year.

Regarding operational tools and facilities, the Bank implemented several modifications from a broad perspective, taking views and requests of market participants into consideration. The Bank reviewed some of the existing operational tools to further facilitate money market operations. In addition, the Bank introduced a scheme for outright purchases of asset-backed securities (ABSs) to encourage the development of the ABS market and strengthen the transmission mechanism of monetary easing. The Bank also introduced a securities lending facility to provide the markets with a secondary source of Japanese government securities (JGSs), which was decided after the start of fiscal 2004, to enhance liquidity and maintain the smooth functioning of the JGS markets.