The key to strengthening monetary easing effects therefore lies in maintaining real interest rates at a relatively low level, by exerting downward pressure on nominal interest rates through a compression of risk premiums (including term premiums). As for the outlook, downward pressure on interest rates is likely to become increasingly pronounced as the Bank proceeds with its large-scale JGB purchases.
In this situation, portfolio rebalancing – in which investors and financial institutions that used to invest their funds in JGBs shift their investment to lending and other assets – is likely to spread steadily.