Sayuri Shirai, 31 July 2017

Portfolio rebalancing through large-scale asset purchases is one of the major transmission channels under the zero lower bound. This column assesses whether the channel has been effective in Japan, focusing in turn on financial institutions, firms, and households. Japanese firms and households are notoriously risk averse, limiting the effectiveness of the portfolio rebalancing channel. These results suggest that more drastic structural reforms and growth strategies are needed.