While on the side of firms and households, an improvement in net worth, combined with a general improvement in economic prospects and hence future earnings, can expand their capacity to borrow. Substitution of assets can also take place across jurisdictions, which would take the form of investors rebalancing portfolios away from euro-denominated assets towards other jurisdictions and currencies providing higher yields.
4  BIS central bankers’ speeches  For example, there is evidence that both the various Large Scale Asset Purchase programmes of the Fed as well as the Bank of Japan’s Quantitative and Qualitative Easing programme led to a significant depreciation of their respective exchange rates, even in a situation in which long-term yields were already very low, as in Japan.