Japan shows limits of expanding central bank balance sheet - Morgan Stanley

Japan’s experience shows that balance sheet expansion does not always lead to asset price inflation and positive wealth effect – a behavioural economic theory, which suggests that people spend more as the value of their assets rise.

Since the Bank of Japan began ramping up its asset purchases in 2015, including direct equity purchases of exchange-traded funds,, Japanese equities have gone more or less sideways, analyst at Morgan Stanley recently noted. 

As of July 31 2020, the Bank of Japan held a total of 665.9 trillion yen in assets, according to data source Japanmacroadvisors.com. 

Major central banks implemented unconventional monetary policy tools like quantitative easing (bond purchases) and negative rates in the aftermath of the 2008 crisis. More aggressive versions of these unconventional tools have been rolled out over the past five months to combat the coronavirus-induced recession fears.