An article in the Wall Street Journal notes that by mid- 2016, the Bank of Japan owned about one-third of all Japanese government bonds, “with its balance sheet ballooning to 85% of gross domestic product.”
a. Briefly explain whether the Bank of Japan’s purchases of Japanese government bonds would appear on the asset side or the liability side of its balance sheet.
b. Why have the balance sheets of most central banks increased substantially in recent years compared with the years before the financial crisis?