Realizing this, the Bank decided to secure smooth provision of liquidity by purchasing JGBs. The effect of these increased purchases of JGBs has been to raise total purchases by the Bank to 1.2 trillion yen per month, up from 400 billion yen until March 2001.
As a result, the outstanding amount of JGBs purchased by the Bank is at present equivalent to roughly 60 percent of the monetary base. The Bank’s purchases of JGBs have indeed contributed to the smooth implementation of quantitative easing. However, as long-term interest rates have been declining, even JGBs have almost become substitutes for current account deposits at the Bank.