With the second channel, the continuation of JGB purchases by the Bank may encourage financial institutions as well as institutional and individual investors to shift some of their portfolios to risk assets; they would do so in the process of adjusting some of their asset management policies away from deflation-oriented strategies.
The so-called portfolio rebalance effect is intended to promote some degree of risk-taking among a wide range of financial institutions and investors, and it is necessary to energize Japan’s economy. Some of that risk money could be allocated to viable emerging, growing firms.