This paper examines how the Bank of Japan's current quantitative and qualitative easing affects the Japanese economy by using a Markov-switching vector autoregression model on daily economic data during January 2012 August 2014. The results reveal that quantitative easing by expanding the monetary base significantly lowers short-term interest rates and raises inflation rates. In addition, the lowered interest rates positively affect inflation rates. Qualitative easing through purchases of long-term government bonds and exchange-traded funds increases economic activity. Purchases of exchange-traded funds stimulate the stock and foreign exchange markets in Japan, while purchases of Japan real estate investment trusts do not have any effect. (C) 2015 Elsevier B.V. All rights reserved.