It is an example of how JGBs play an important role in the Bank’s money market operations.4 Apparently, the Bank is the most proactive among the central banks of major countries in using government securities in the money market operations. This way, the Bank of Japan uses JGBs on a large scale in conducting money market operations.
In the long run, however, both deficits could become much more worrisome. There are forces tending to increase both deficits: political and demographic for budget deficits, income elasticities for trade deficits. At some point, continued large-scale trade deficits could trigger equilibrating, and possibly dislocating, changes in prices, interest rates, and exchange rates.