As businesses rely heavily on banks for their funding in Japan, it is an important policy agenda to expand the channels of financial intermediation, such as the ABS market, which are not vulnerable to banks' risk-taking capability. With a view to strengthening banks' intermediation function, the Bank of Japan purchases corporate stocks held by commercial banks.
This is also an unconventional measure for a central bank. In Japan, due to cross-shareholdings between banks and businesses, some large banks hold a substantial amount of corporate stocks. Because of these holdings, banks are exposed to the impact of stock market volatility on their balance sheets, which may constrain their risk-taking capability.