Since this policy was announced, the interest rates on the benchmark government 10-year bond have sunk to historically low levels, at one point falling below 0.65 percent. One objective of this policy move is, presumably, to boost money growth and stimulate economic activity by providing so much liquidity that people feel they must go out and spend the extra money. Alternatively, the goal may be to raise expectations about price inflation. This objective would require BOJ to announce inflation targets and to implement monetary growth policy in a credible manner to reach the inflationary target. An additional objective could be to counter the leakage of money from the banking system that is occurring as deposits are withdrawn from banks that are perceived to be unsound and the cash is stashed in bedroom chests and strong boxes.
Anecdotal information indicates that the sale of home safes has boomed.
A second leakage of monetary funds could be coming from the shift of deposits from banks to the postal savings system. Normally, this would not be a problem for the money supply because these deposits are reloaned by the Trust Fund Bureau of the Ministry of Finance. However, when the inflow is unexpectedly large and fast, TFB's ability to relend is constrained by the plans laid out in the annual budget. The postal savings system, in effect, would be operating with excess reserves, which reduces the supply of money. Thus, TFB could be recycling the surge of deposits without resorting to loans.