Textbooks on macroeconomics or financial theory explain how central banks try to achieve price stability. Normally, a central bank targets and controls rates in the money market, where transactions take place between financial institutions. In Japan, the Bank guides money market rates through market operations, providing or absorbing funds in the market by buying or selling Japanese government securities and bills.
The second stage involves the propagation of monetary policy impulses from the financial market to the real economy – by influencing spending decisions of individuals and firms. Within the financial system, money market is central to monetary operations conducted by the central bank. 22.