slide tu - Intervention and the Bank of Japan -BOJ should...

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Intervention and the Bank of Japan -BOJ should conduct sterilized or unsterilized intervention when it sells yen in the open market. This is an attempt to outline difference between the two. First some background information. -Central Bank clearing balances (aka reserves) are a case of what is called ‘inside money.’ For example, a check drawn on one bank and deposited into another is accounted for via a debit for the former and a credit the latter. All that private sector activity can do is move balances from one account to another. The total remains the same. Bank lending does not change total clearing balances, though it could cause a shift from one account to another.(slide 1) -When the BOJ, buys $ and pays for them with yen, payment is made by crediting the clearing account of a member bank. -This is a net addition to the sum of the clearing balances held by all the banks with BOJ clearing accounts. Only the BOJ can so inject or remove net yen for its clearing system. It is the ‘monopoly supplier’ of clearing balances, which is the
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slide tu - Intervention and the Bank of Japan -BOJ should...

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