Money Market Operations in Fiscal 2013
August 12, 2014
Financial Markets Department
Bank of Japan
Introduction
During fiscal 2013 (April 1, 2013 to March 31, 2014), the Bank of Japan pursued extremely powerful monetary easing under quantitative and qualitative monetary easing and significantly increased the amount outstanding of the monetary base through purchases of a wide range of assets, including large-scale purchases of Japanese government bonds (JGBs).
At the Monetary Policy Meeting (MPM) held on April 3 and 4, 2013, immediately after the start of the fiscal year, the Bank introduced quantitative and qualitative monetary easing. Specifically, to achieve the price stability target of 2 percent in terms of the year-on-year rate of change in the consumer price index (CPI) at the earliest possible time, with a time horizon of about 2 years, the Bank decided to change the main operating target for money market operations from the uncollateralized overnight call rate to the monetary base and to double the monetary base and the amounts outstanding of JGBs and exchange-traded funds (ETFs) in 2 years, as well as to more than double the average remaining maturity of JGB purchases.
Under this quantitative and qualitative monetary easing, the Bank sought to expand the monetary base through purchases of a wide range of assets, including purchases of JGBs, in its money market operations. As a result, the monetary base at the end of 2013 stood at 201.8 trillion yen, an increase of 63.4 trillion yen from the same time a year earlier. The Bank's operations continued to steadily increase the monetary base, which reached 219.9 trillion yen at the end of March 2014, up 73.8 trillion yen from a year earlier.
Through such money market operations, the amount outstanding of JGBs held by the Bank reached 141.6 trillion yen at the end of 2013, up 52.4 trillion yen from a year earlier, and 154.2 trillion yen at the end of March 2014, up 62.8 trillion yen from a year earlier. The average remaining maturity of JGB purchases during fiscal 2013 more than doubled to 7.3 years from slightly less than 3 years prior to the introduction of quantitative and qualitative monetary easing.
This paper first gives an outline of the conduct of money market operations during fiscal 2013 and explains the resulting changes in the Bank's balance sheet. It then discusses developments in financial markets under the conduct of these money market operations. Finally, the paper describes the conduct of individual measures in money market operations and systemic changes surrounding money market operations.
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Financial Markets Department, Bank of Japan
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