The paper argues that Japan’s legislators should use this window of opportunity to introduce 100% de jure reserve requirements for transfer deposits.

Such a move would not only take advantage of the benefits propagated by supporters of a reserve-backed regime. The implied BoJ’s balance sheet expansion would allow the Bank to further purchase JGBs. As the expansion would be permanent, the regime shift would not only stabilize the government’s fiscal condition, the BoJ, too, would no longer have to worry about exiting its policy of quantitative easing. Both the government and the central bank could focus on their primary policy goals.