Portfolio Rebalancing Following the Bank of Japan's Government Bond Purchases: A Fact Finding Analysis Using the Flow of Funds Accounts Statistics

After the Bank of Japan (BOJ) introduced Quantitative and Qualitative Monetary Easing in April 2013, the BOJ's government bond purchases increased by a large amount, and entities other than the BOJ, as a group, increased loans and investment in equities, mutual funds, and corporate bonds, while reducing their holdings of government bonds. The extent of portfolio rebalancing differs across entities: we observe rebalancing for domestic banks and the overseas sector; in contrast, so far no rebalancing for insurance companies, corporate pension funds, and public pensions can be observed. In addition to changes in the balance sheet conditions of domestic banks and loan demand faced by domestic banks, purchases of government bonds with a longer remaining maturity by the BOJ likely have played a role in the increase in bank loans by domestic banks.