Among these measures was the stock purchasing program introduced in the autumn of 2002, which could be interpreted as a proto-typical macro-prudential policy. The program was introduced when the risk-taking capacity of Japanese banks was severely eroded by non-performing loans.
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.