Unconventional Monetary Policies in UK and Japan

Starting in 2009, the BoE has introduced large asset purchases and long-term lending operations. Since then, its operational framework relies on a structural excess of bank reserves. Money market rates are in line with the interest rate paid on reserves: Bank Rate, which is the policy rate. In 2022, the BoE started downsizing its securities portfolio within its exit strategy from QE policies. At the end of the normalization process, the stock of reserves will be determined by the demand made by banks applying to the STR facility: at the steady state, monetary policy will be implemented under a demand-driven floor system. The BoJ was the first central bank introducing a QE policy in 2001. The Comprehensive Monetary Easing program was introduced in 2010, under which the BoJ purchased a wide range of financial assets. The Quantitative and Qualitative Monetary Easing (QQE), introduced in 2013, gave a remarkable acceleration to the pace of asset purchases. Since 2016, a negative interest rate policy has been adopted. In the same year, the QQE with yield curve control has been introduced: the BoJ is committed to keep the yield of 10-year government bonds around zero through its bond purchases, thus making the size of the program unlimited.