without borrowing ... they just print more money. They have several mechanisms to put this money into circulation. The BOJ is printing Yen, buying dollars and then using the dollars to buy US treasuries. From the article I linked, I think this is unsterilized (if it was sterilized, the BOJ would be doing other transactions to reduce the money supply by an equivalent amount). If it was sterilized, they would be borrowing Yen by issuing notes to buy the dollars and increasing their outstanding debt. The evidence suggests this is unsterilized (essentially FREE money!)
i believe they are using the Foreign Exchange Special Account to fund the purchases, and that they are sterilized. apparently purchases made with repo agreements.
according to Nikkei, the agreement reached between MOF and BOJ last year established a framework whereby US Treasurys, to be held by FESA, would be sold under repurchase agreement in order to procure funding for currency intervention. this was the famous extension with an upper limit of 10 trillion yen, or nearly $100 billion, for the period from Dec 26 2003 until March 31, 2004.
nikkei.co.jp
as of Feb 29 2004, BOJ reports that its balance of purchases with resale agreement from FESA was 6.1489 trillion yen (61% of the limit).
boj.or.jp
that would leave about 3.9 trillion yen more for the month of March. so perhaps one interpretation of the recent noise out of MOF and BOJ is that they have used up the entire 10 trillion yen. we should know by around the second week of April, when BOJ updates these figures.
background on FESA from the MOF: mof.go.jp
sorry, the above links are not in English. |
