Given this line of thinking, it is important to steadily understand how funds are used for what purposes and, in doing so, whether financial institutions are conducting proper liquidity management.
The Bank of Japan conducts both on-site examination and off-site monitoring, and for the central bank as a lender of last resort, the current crisis obviously showed the importance that the central bank has hands-on knowledge. In that regard, close liquidity monitoring by the Bank has been effective in maintaining the relative stability of Japan’s financial markets.