We could raise the current account balance above 12 trillion yen in September because of a surge in demand for liquidity caused by the terrorist attacks, the collapse of a large retailer, and a fall in stock prices. The effects of those factors were also amplified in the period approaching the end of September.
The rising demand for liquidity also reflected waning incentives of financial institutions to invest their funds in money markets. Investing 10 billion yen overnight earns merely 273 yen, which is not sufficient to cover various transaction costs. When interest rates significantly decline, financial institutions prefer to hold funds with the Bank of Japan even without any interest earnings.