
Contents
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The Appreciation of the Yen The Appreciation of the Yen
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Enhancing Monetary Easing Enhancing Monetary Easing
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Intervening in the Foreign Exchange Market Intervening in the Foreign Exchange Market
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Influencing Longer-Term Interest Rates Influencing Longer-Term Interest Rates
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Measures to Lower The Longer-Term Risk-Free Rate Measures to Lower The Longer-Term Risk-Free Rate
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Lowering Risk Premia Lowering Risk Premia
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The Establishment of an Asset Purchase Program The Establishment of an Asset Purchase Program
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Reactions to the New Policy Package Reactions to the New Policy Package
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Concerns About the Exit Concerns About the Exit
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The Central Bank in a Democratic Society The Central Bank in a Democratic Society
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Negative Equity at the Central Bank Negative Equity at the Central Bank
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The Accounting Issues Related to the Exit The Accounting Issues Related to the Exit
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The Role of Central Bank Capital from an Economics Perspective The Role of Central Bank Capital from an Economics Perspective
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The Bank of Japan’s Views The Bank of Japan’s Views
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Twelve The Comprehensive Monetary Easing Policy
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Published:August 2021
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Abstract
This chapter studies the Comprehensive Monetary Easing. During the recovery from the global financial crisis of 2007–2009, the Japanese economy faced the challenge of a sharp appreciation of the yen, particularly brought on by monetary easing in the United States. This problem became most acute in mid-2010 when the Federal Reserve adopted its second round of quantitative easing “QE2.” To address the weakness in Japanese business sentiment and in prices caused by the strong yen, the Bank of Japan felt that they had no option other than to try to lower both short- and longer-term interest rates. But with interest rates already so low, they only had limited room for further reductions. To address this challenge, in October of 2010, the bank adopted a new and exceptional framework called Comprehensive Monetary Easing, in which the bank would purchase not only long-term Japanese Government Bonds but also begin purchasing risk assets such as exchange-traded funds invested in corporate equity securities — at that time an extremely unusual action for a central bank.
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