Fed Increases Focus on Japan-Style Tools With Securities Floor

The Federal Reserve’s decision to sustain the current level of its assets intensifies the focus of the central bank on policy tools similar to those used with little impact by Japan last decade.

The Fed on Aug. 10 set a floor on its holdings at the current $2.05 trillion level, aiming to stop any contraction in the balance sheet from pushing up borrowing costs during a slowdown in economic growth. Other Fed tools, including a reduction in the benchmark interest rate almost to zero, revived credit markets without yet ensuring a sustained recovery.