The Bank of Japan's Policy Measures during the Financial Crisis

• Outline
• Monetary Policy Measures
• Measures to Secure the Stability of the Financial System
• Changes in the Bank's Balance Sheet and Collateral Accepted

Outline

After the fall of 2008, when the turmoil in global financial markets intensified, the Bank of Japan implemented a wide range of policy measures on both the monetary policy and financial system policy fronts.

Monetary Policy Measures

The Bank implemented various monetary policy measures after the fall of 2008 in three main areas:

1. Reductions in the policy interest rate
2. Measures to ensure stability in financial markets
3. Steps to facilitate corporate financing

Given that the outright purchases of corporate financing instruments, as part of the steps to facilitate corporate financing, essentially involve taking on the credit risks of individual private firms and as such are an exceptional measure for a central bank, the Bank established basic principles regarding the outright purchases of corporate financing instruments [PDF 34KB] before beginning to conduct the purchases.

On October 30, 2009, the Bank made the decisions on various temporary measures regarding money market operations ( Statement on Monetary Policy [PDF 20KB]). In order to ensure financial market stability and thereby facilitate corporate financing, it was necessary to adopt the most effective method for money market operations that conformed to changes in financial markets. Based on this understanding, the Bank decided the extensions of the effective period of expansion in the range of eligible collateral and the complementary deposit facility, while deciding the expiration of outright purchases of CP and corporate bonds as scheduled. In order to ensure financial market stability toward the end of fiscal 2010, special funds-supplying operations to facilitate corporate financing remained in effect until the end of March 2010. From April 2010, the Bank has been providing ample liquidity mainly through funds-supplying operations against pooled collateral, which accept a wider range of collateral.

Measures to Secure the Stability of the Financial System

With a view to securing the stability of the financial system, the Bank resumed its purchases of stocks held by banks. It also decided to provide subordinated loans to banks.

Effects of Policy Measures on the Bank's Balance Sheet

The implementation of measures listed above affects the Bank's balance sheet as well as the amount and composition of collateral it accepts. Changes in the Bank's balance sheet are shown under the title " Changes in the Bank's Balance Sheet and Collateral Accepted."

Monetary Policy Measures

1. Reductions in the Policy Interest Rate

Table : Reductions in the Policy Interest Rate

Date	Target for the Uncollateralized Overnight Call Rate	Basic Loan Rate	Rate Applied to the Complementary Deposit Facility	Releases
Feb.21,2007	Around 0.5%	0.75%	--	[PDF 63KB]
Oct.31,2008	Around 0.3%	0.5%	0.1%	[PDF 98KB]
Dec.19,2008	Around 0.1%	0.3%	0.1%	[PDF 86KB]

• Statements on Monetary Policy
• The Basic Loan Rates (Time Series)

2. Measures to Ensure Stability in Financial Markets

• Introduction or Modification of Schemes of Operations

3. Steps to Facilitate Corporate Financing

• Introduction or Modification of Schemes of Operations
• Basic principles regarding the outright purchases of corporate financing instruments [PDF 34KB]

Measures to Secure the Stability of the Financial System

Stock Purchasing Plan

• Stock Purchasing Plan

Provision of Subordinated Loans to Banks

• Provision of Subordinated Loans

Changes in the Bank's Balance Sheet and Collateral Accepted

After the fall of 2008, the Bank of Japan introduced new funds-supplying operations and expanded them, while continuing to provide substantial funds through existing operations. These developments were reflected in the Bank's balance sheet. With the implementation of various measures, the balance sheet expanded through the end of fiscal 2008 (March 2009). In assessing the balance sheet, however, it should be noted that the expansion/contraction of the balance sheet and the degree of monetary easing do not always correspond. For example, the outright purchases of CP may decrease when financial institutions feel less need to sell their CP to the Bank as the functioning of the CP market improves, and therefore a decline in the amount outstanding of outright purchases of CP does not necessarily imply monetary tightening. Thus, it is necessary to comprehensively assess changes in the overall balance sheet or in an individual component of the balance sheet, taking into account financial market conditions.

The amount outstanding of Bank's assets increased with the Bank's provision of substantial funds ( Chart 1).

Regarding changes in the amount outstanding of individual operations, purchases of JGSs under repo agreement and operations utilizing corporate debt increased markedly through the end of fiscal 2008 (Chart 2). Among operations utilizing corporate debt, purchases of CP under repo agreement increased initially to a large extent (Chart 3). Thereafter, special funds-supplying operations to facilitate corporate financing were introduced and their amount outstanding increased accordingly. The amounts outstanding of outright purchases of CP and outright purchases of corporate bonds, which were introduced in the beginning of 2009, rose until around the end of fiscal 2008 (Chart 4 ). The amount outstanding of U.S. dollar funds-supplying operations, which were introduced in September 2008 and then expanded, increased sharply through the end of 2008, but decreased thereafter as conditions in the U.S. dollar funding market improved (Chart 5).

Collateral accepted by the Bank, which does not appear in the balance sheet, increased (Chart 6). In particular, corporate debt, especially loans on deeds to companies, increased as the Bank introduced and expanded the operations utilizing corporate debt and expanded the range of corporate debt it accepted as eligible collateral (Chart 7).

As for the Bank's liabilities and net assets, current deposits increased with the provision of substantial funds (Chart 8 ). Funds for U.S. dollar funds-supplying operations are provided under the U.S. dollar swap agreement with the Federal Reserve Bank of New York (NY Fed). The Bank provides yen funds to the NY Fed in exchange for U.S. dollars. These yen funds are deposited to the NY Fed's account held at the Bank, which is classified as "other deposits."

Statistics

The balance sheet and the amount outstanding of collateral accepted

Table : The balance sheet and the amount outstanding of collateral accepted

Statistics	Contents
Bank of Japan Accounts (Every Ten Days)	Developments in the balance sheet every ten days
Bank of Japan Accounts	The amount outstanding of items of the balance sheet as of the end of each month
Collateral Accepted by the Bank of Japan	The amount outstanding of collateral accepted as of the end of each month

The size and amount outstanding of various operations

Table : The size and amount outstanding of various operations

Statistics	Contents
Money Market Operations Conducted by the Bank of Japan (Daily)	Day-to-day operations and their results
Money Market Operations Conducted by the Bank of Japan (Monthly)	A list of operations by month
Monetary Base and the Bank of Japan's Transactions	Details of supply of funds and changes in the monetary base by month
Sources of Changes in Current Account Balances at the Bank of Japan and Market Operations (Final Figures)	Changes in current account balances and in the size of market operations by month

Chart

• Data for Charts

Assets

Chart 1: Assets

[画像:Chart 1: Graphs of BOJ's assets by components. The details are shown in the main text.]

Source Bank of Japan, "Bank of Japan Accounts."

Amount Outstanding of Short-Term Operations

Chart 2: Amount Outstanding of Short-Term Operations

[画像:Chart 2: Graphs of amount outstanding of short-term operations by components. The details are shown in the main text.]

Source Bank of Japan, "Monetary Base and the Bank of Japan's Transactions."

Chart 3: Amount Outstanding of Operations Utilizing Corporate Debt

[画像:Chart 3: Graphs of amount outstanding of operations utilizing corporate debt by components. The details are shown in the main text.]

Note Financial institutions can borrow funds by submitting corporate debt as collateral through funds-supplying operations against pooled collateral, in addition to the operations utilizing corporate debt. Developments in the amount outstanding of corporate debt accepted as collateral are shown in Chart 7.

Source Bank of Japan, "Monetary Base and the Bank of Japan's Transactions."

Chart 4: Amount Outstanding of Outright Purchases of Corporate Debt

[画像:Chart 4: Graphs of amount outstanding of outright purchases of corporate debt by components. The details are shown in the main text.]

Source Bank of Japan, "Monetary Base and the Bank of Japan's Transactions."

Chart 5: Amount Outstanding of U.S. Dollar Funds-Supplying Operations

[画像:Chart 5: Graph of amount outstanding of U.S. dollar funds-supplying operations. The details are shown in the main text.]

Source Bank of Japan, "Sources of Changes in Current Account Balances at the Bank of Japan and Market Operations (Final Figures)."

Collateral Accepted by the Bank of Japan

Chart 6: Total Amount of Collateral Accepted

[画像:Chart 6: Graphs of total amount of collateral accepted by components. The details are shown in the main text.]

Note Corporate debt is the total amount outstanding of collateral that can be pledged for special funds-supplying operations to facilitate corporate financing.

Source Bank of Japan, "Collateral Accepted by the Bank of Japan."

Chart 7: Corporate Debt Accepted as Collateral

[画像:Chart 7: Graphs of corporate debt accepted as collateral by components. The details are shown in the main text.]

Note CP excludes ABCP and CP issued by real estate investment corporations.

Source Bank of Japan, "Collateral Accepted by the Bank of Japan."

Liabilities and Net Assets

Chart 8: Liabilities and Net Assets

[画像:Chart 8: Graphs of liabilities and net assets by components. The details are shown in the main text.]

Source Bank of Japan, "Bank of Japan Accounts."

Data for Charts

Table : Data for Charts

Date	Contents	Data
Dec. 15, 2010	Data for charts 1 to 8	[CSV 14KB]