7 The ECB (like other central banks) faces a difficult balancing act between doing what is necessary to maintain a properly functioning monetary policy transmission mechanism and doing too much for too long, thus reducing incentives for market participants to make markets work as they should.
In Japan, the combination of zero interest rates and quantitative easing, while successfully containing liquidity problems of financial institutions, have had some detrimental effect on the intermediary function of the money market and on corporate bond issuance.