So far, massive JGB purchases by the Bank have contained various factors that have exerted upward pressure on interest rates, and the effect of reducing risk premiums is expected to strengthen cumulatively as the amount of purchases increases (Chart 10). As for the second channel, the portfolio rebalancing effect is aimed at stimulating economic activity and asset markets.
The Bank generates large amounts of financial institutions’ excess reserves through its massive purchases of JGBs from them and induces them to rebalance their portfolios from JGBs to risk assets with higher expected returns. The Bank decided to extend the average remaining maturity of JGB purchases at the MPM held on April 3 and 4 so that the portfolio rebalancing effect can strengthen.