The above textbook theory does not seem to work in Japan's current situation. Due to the prolonged economic slump, money market rates have already fallen to virtually zero percent and thus the traditional practice of easing monetary policy by lowering money market rates is no longer effective.
Against this background, the Bank two years ago launched a policy of quantitative easing, shifting the target of money market operations from the overnight call rate to the outstanding balance of current accounts held by financial institutions with the Bank.