What is the reserve requirement system? What are excess reserves?

Claims Supported by This Source

1. Reserve requirement system = The obligation for financial institutions to deposit a certain ratio (reserve ratio) or more of their deposits with the Bank of Japan. Introduced as a monetary policy tool by a law enacted in 1957.
2. Reserve requirement ratios are determined by the Policy Board at Monetary Policy Meetings and have not been changed since October 1991.
3. In major countries with developed short-term money markets, reserve ratio manipulation is not used as a tool for monetary easing or tightening. Its role is to stabilize the demand for current account deposits by maintaining the required reserve amount.
4. Since the 2000s, excess reserves have become the norm, and interest is paid on them under the Complementary Deposit Facility.
5. Applicable institutions: banks, shinkin banks with deposits exceeding 160 billion yen, and the Norinchukin Bank.

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