What the Policy Aims to Do
Ordinary monetary policy is conducted by raising or lowering the policy rate, but when rates are already at a low level, a central bank can directly increase the amount of funds circulating in the market by purchasing government bonds and other assets — this is quantitative easing. The Bank of Japan has also implemented it in the past as part of large-scale monetary easing measures.
Relationship to the Markets
Quantitative easing is expected to push down market interest rates and encourage the funds supplied to the market to flow into risk assets such as stocks, so it is sometimes discussed as a supportive factor for the stock market. That said, actual stock prices are formed by reflecting many factors — the economy, corporate earnings, and market sentiment among them — so implementing quantitative easing does not guarantee that stock prices will rise.