The primary surplus, almost nil in 2005, exceeded 3 per cent of GDP. After rising for two years, the ratio of debt to GDP fell to 104 per cent. Almost one point of the reduction of 2.5 percentage points in the debt was due to the decline in the Treasury’s assets with the Bank of Italy.
The Bank of Japan purchased stocks held by commercial banks, liberating the capital these banks held against the risks associated with their stock holdings, and thus improving their risk-taking capacity. Seen in this way, the Bank’s stock purchasing was akin to the counter-cyclical capital buffers now being discussed in international forums as a possible macro-prudential policy option.