aim is for the purchase of various risk assets by the bank to act as a catalyst to increase the demand for and supply of riskier financial assets in the market and spur the effective use of the ample funds that have been already provided to the market so as to provide a boost to the economy. the bank ’ s decision to encourage a decline in longer - term interest rates and various risk premiums through comprehensive monetary easing was based on its experience with the quantitative easing policy16 during the five years from march 2001 through march 2006. since one of the ways in which quantitative easing worked was through the policy duration effect, it is difficult to clearly isolate the effects of quantitative expansion itself in assessing the overall effect of the policy. however, most subsequent empirical studies suggest that although quantitative easing contributed to stabilizing the financial system, the impact on economic activity and prices was limited. 17 moreover, preliminary assessment indicates that the extent to which the decline in interest rates resulting from the policy duration effect of the quantitative easing policy affected the yields of other financial assets – the so - called “ portfolio rebalancing effect ” – was limited. given these results, the bank judged that – in a situation where there was little room for a further decline in short - term interest rates – the most effective policy to achieve additional monetary easing would be to try to directly effect a decline in longer - term interest rates and various risks premiums, meaning that this policy pursues the first and the third of the objectives outlined earlier, that is, to lower interest rates and achieve qualitative easing. however, i did not concur with all the measures of the bank ’ s comprehensive monetary easing policy. specifically, i disagreed with the inclusion of government securities as assets to be purchased through the program. the main reason is that i believe it would be more effective to strengthen efforts to effect a decline in risks premiums, which remain at a high level – that is, to focus on qualitative easing – than to focus on longer - term interest rates at a time when financial institutions were raising the weight of government securities in their the bank ’ s quantitative easing policy consisted of four measures : ( 1 ) the main operating target for money market operations was changed from the uncollateralized overnight call rate to the outstanding balance of the current accounts at the bank ; ( 2 ) the new procedures for money market operations would remain in place until the rate of change in the cpi ( excluding perishables, on a nationwide statistics )

on a year - on - year basis was stable at or above zero percent ; ( 3 ) the bank raised the target for the balance outstanding at the bank ’ s current accounts to around 5 trillion yen ; and ( 4 ) the bank would increase the amount of its outright purchase of long - term government bonds from the then 400 billion yen per month, if it considered this to be necessary for the smooth provision of liquidity. see hiroshi ugai, “ effects of the quantitative easing policy : a survey of empirical analyses, ” monetary and economic studies, 25 ( 1 ), institute for monetary and economic studies, bank of japan, 2007. bis central bankers ’ speeches portfolios and both short - and long - term interest rates were declining anyway ( the yield on 2 - year instruments in the past month has been in the range of only 0. 130 – 0. 200 percent ). in fact, i think that even before the implementation of comprehensive monetary easing, a lowering of longer - term interest rates had already been achieved to a substantial extent through the bank ’ s lowering of the policy interest rate to 0. 1 percent, through policy duration effects from previous policies, and through the provision of ample funds. therefore, i felt that increasing the purchase of government securities to achieve a further decline in longer - term interest rates would only have limited positive effects18 and would increase the risk of overheating in the bond market ; moreover, excessively low interest rates could deprive financial institutions of profit opportunities and instead hamper the effects of monetary easing, so that any positive effects might be outweighed by the potential negative side effects. another reason why i disagreed with the purchase of long - term government bonds through the program is that – in a situation where there is uncertainty over government finances in the medium to long term – making an exception to the principle that the outstanding amount of the bank ’ s holdings of jgbs should be kept below the outstanding amount of banknotes in circulation could arouse suspicions in the market that the bank had taken a step toward engaging in government debt financing, which in turn could adversely affect long - term interest rates. 4. ensuring the bank ’ s financial health next, i would also like to mention the disadvantages of risk asset purchases by the bank. excessive intervention by the bank may distort price formation in the market and deprive financial institutions of profit opportunities. moreover, the bank, too, may ultimately incur losses from the purchases. as you