With this QQE, Japan’s monetary base two years from now will become 270 trillion yen, or 2.78 trillion dollars, reaching 56 percent of nominal GDP. For reference, the current monetary base in the United States is 329 trillion yen, or 3.39 trillion dollars, which is 20 percent of nominal GDP.
To build the monetary base, on the asset side of the BoJ’s balance sheet, the holdings of Japanese government bonds (JGBs) would be doubled. An associated massive purchase of JGBs would alter supply and demand conditions in the JGB market and put strong downward pressure on long-term interest rates. However, there was a problem.