The more difficult the problems facing Japan’s economy, the more aggressively the Bank of Japan should pursue new policy options without being held hostage by precedent. Quantitative easing is a policy option that no other central bank has ever taken and we also recognize that the purchase of stocks held by banks is a policy option that is not conceivable under normal circumstances.
Indeed, the purchase of asset-backed securities is an extremely unusual policy option in the sense that the central bank directly shoulders the credit risk of private debt obligations. Traditional monetary policy usually focuses on money, which sits on the liability side of banks’ balance sheets, and hardly looks at credit as an independent item.