Document Type

Case Studies


Following the collapse of Lehman Brothers in September 2008, the global commercial paper (CP) market began to tighten as interest rates rose and investors sought more-liquid money market securities. The Bank of Japan (BOJ) introduced several operations in late 2008 to promote liquidity in the CP market. In January 2009, the BOJ began to purchase CP and asset-backed CP outright from banks and other financial institutions. The BOJ could purchase up to ¥3 trillion of CP with a residual maturity of up to three months, among other short-term securities, via 10 purchases of up to ¥300 billion each. The BOJ limited its purchases to CP with a credit rating of a-1 or guaranteed by a company rated a-1. The BOJ would conduct purchases until March 31, 2009; it later extended the measure until December 31, 2009. As the CP market normalized, usage of the outright purchase measure decreased, with the last bid occurring in September 2009. The measure is seen as relatively successful, as interest rates on CP decreased during its first few months and the program provided needed liquidity to financial institutions during a period of market stress.