In these circumstances, both developed and emerging market economies are facing the difficult balancing act between maintaining sustainable economic growth on the one hand and anchoring longer-term inflationary expectations on the other. These global economic forces, both downside and upside, affect Japan’s economy through a variety of channels, adding to uncertainty for policy-makers.
Given this situation, since the MPM held on May 19 and 20, 2005, the Bank has been allowing a temporary fall of the outstanding balance below the target range when it is judged, in the situation where the Bank is doing its utmost to provide funds while at the same time giving due consideration to the effects on the functioning of the market, that financial institutions' liquidity demand is exceptionally weak.