On the Effect of Bank of Japan's Outright Purchase on the JGB Yield Curve PDF Download
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Author: Masafumi Nakano
Publisher:
ISBN:
Category :
Languages : en
Pages : 25
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Book Description
This paper examines an impact of Bank of Japan (BOJ)'s outright purchase on the JGB (Japanese government bond) yield curve. Particularly, we develop a simple state space model, which incorporates new factors regarding the BOJ's announcement for its outright purchase and the current market outstanding with standard level and spread factors. Based on the model with a filtering method, we also implement an empirical analysis with time series of the BOJ's announcement records during 2014/10/22-2017/8/3 in the quantitative-qualitative easing(QQE) period to estimate the sensitivities of interest rates against the changes in the market expectation for the net supply with each sector of JGB. We expect the current work provides a basis for considering quantitative effects on the term structure by BOJ's policy changes such as termination or significant reduction of the BOJ's outright purchase. For instance, our scenario analysis shows substantial increase in the 30 year yield with steepening of 20-30 year spread.
Author: Masafumi Nakano
Publisher:
ISBN:
Category :
Languages : en
Pages : 25
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Book Description
This paper examines an impact of Bank of Japan (BOJ)'s outright purchase on the JGB (Japanese government bond) yield curve. Particularly, we develop a simple state space model, which incorporates new factors regarding the BOJ's announcement for its outright purchase and the current market outstanding with standard level and spread factors. Based on the model with a filtering method, we also implement an empirical analysis with time series of the BOJ's announcement records during 2014/10/22-2017/8/3 in the quantitative-qualitative easing(QQE) period to estimate the sensitivities of interest rates against the changes in the market expectation for the net supply with each sector of JGB. We expect the current work provides a basis for considering quantitative effects on the term structure by BOJ's policy changes such as termination or significant reduction of the BOJ's outright purchase. For instance, our scenario analysis shows substantial increase in the 30 year yield with steepening of 20-30 year spread.
Author: Takahiro Hattori
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
This is the first study known to analyze fixed-rate purchase operations by the Bank of Japan (BOJ), as conducted under the policy of Quantitative and Qualitative Easing (QQE) with Yield Curve Control (YCC). On February 3, 2017, the BOJ conducted the first unlimited purchase of 10-year Japanese government bonds (JGB). We interpret this new operation as an attempt to convert the nonstationary process into a stationary process, and using intraday data empirically show that the BOJ successfully stabilized the JGB yield as a result.
Author: Nobuyuki Oda
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper provides an empirical investigation of monetary policy in Japan in the zero interest rate environment that has held sway since 1999. In particular, we focus on the effects of the zero interest rate commitment and of quantitative monetary easing on medium- to long-term interest rates in Japan. In the study we apply a version of the macro-finance approach, involving a combination of estimation of a structural macro-model and calibration of time-variant parameters to the yield curve observed in the market. This enables us to decompose interest rates into expectations and risk premium components and simultaneously to extract the market's perception of the Bank of Japan's (BOJ's) willingness to carry on its zero interest rate policy. In the analysis we make clear the counterfactual policy that would have been practiced in the absence of the actual policies followed by the BOJ since 1999. From this analysis, we tentatively conclude that the BOJ's monetary policy since 1999 has functioned mainly through the zero interest rate commitment, which has led to declines in medium- to long-term interest rates. We also find some evidence that, up until the end of 2003, raising the reserve target may have been perceived as a signal indicating the BOJ's accommodative policy stance although the size of the effect is not large. The portfolio rebalancing effect - either by the BOJ's supplying ample liquidity or by its purchases of long-term government bonds - has not been found to be significant.
Author: Naoyuki Yoshino
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
In April 2013, the Bank of Japan (BOJ) introduced an inflation target of 2% with the aim of overcoming deflation and achieving sustainable economic growth. But due to lower international oil prices, it was unable to achieve this target and was forced to take further measures. Hence, in February 2016, the BOJ adopted a negative interest rate policy by massively increasing the money supply through purchasing long-term Japanese government bonds (JGB). The BOJ had previously purchased short-term government bonds mainly, a policy that flattened the yield curve of JGBs. On the one hand, banks reduced the numbers of government bonds because short-term bond yields had become negative, and even the interest rates of long-term government bonds up to 15 years became negative. On the other hand, bank loans to the corporate sector did not increase due to the Japanese economy's vertical investment-saving (IS) curve. Firstly, we explain why the BOJ has to reduce its 2% inflation target in the present low oil price era. Secondly, we argue that Japan cannot make a sustainable recovery from its long-lasting recession and tackle its long-standing deflation problem by means of its current monetary policy and its negative interest rate policy in particular. It is of key importance to make the IS curve downward sloping rather than vertical. That means the rate of return on investment must be positive and companies must be willing to invest if interest rates are set too low. Japan's long-term recession is due to structural problems that cannot be solved by its current monetary policy. The last section reports our simulation results of tackling Japan's aging population by introducing a productivity-based wage rate and postponement of the retirement age, which will help the recovery of the Japanese economy.
Author: Sayuri Shirai
Publisher:
ISBN: 9784899740971
Category : Economic development
Languages : en
Pages : 242
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Book Description
In April 2013 the Bank of Japan launched an unprecedented quantitative and qualitative monetary easing policy. It was thought that a 2% price stability target could be achieved within 2 years; 4 years on and we are still mission incomplete. Mission incomplete! This phrase neatly captures the progress made by the Bank of Japan (BOJ) in reflating the economy. In April 2013, the BOJ launched an unprecedented quantitative and qualitative monetary easing policy. The BOJ was certain that the 2% price stability target would be achieved within 2 years. About 4 years later, the BOJ lags behind other major central banks, with actual inflation and inflation expectations still well below 2%. What happened? And what should the BOJ do next? This former policy maker's account expertly traces and analyzes the policy's consequences.
Author: Tanweer Akram
Publisher:
ISBN:
Category : Government securities
Languages : en
Pages : 30
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Book Description
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 149832892X
Category : Business & Economics
Languages : en
Pages : 39
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Book Description
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Author: William Curt Hunter
Publisher: MIT Press
ISBN: 9780262582537
Category : Business & Economics
Languages : en
Pages : 650
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Book Description
A study of asset price bubbles and the implications for preventing financial instability.
Author: Masahiro Kawai
Publisher: Edward Elgar Publishing
ISBN: 0857933353
Category : Business & Economics
Languages : en
Pages : 321
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Book Description
Asian economies strengthened their monetary and currency management after the Asian financial crisis of 19971998, and came through the global financial crisis of 20072009 relatively well. Nevertheless, the recent global crisis has presented new challenges. This book develops recommendations for monetary and currency policy in Asian economies aimed at promoting macroeconomic and financial stability in an environment of global economic shocks and volatile capital flows. Monetary and Currency Policy Management in Asia draws lessons from crises and makes concrete macroeconomic policy recommendations aimed at minimizing the impacts of an economic and financial downturn, and setting the stage for an early return to sustainable growth. The focus is on short-term measures related to the cycle. The three main areas addressed are: monetary policy measures, both conventional and unconventional, to achieve both macroeconomic and financial stability; exchange rate policy and foreign exchange reserve management, including the potential for regional cooperation to stabilize currency movements; and ways to ease the constraints on policy resulting from the so-called 'impossible trinity' of fixed exchange rates, open capital accounts and independent monetary policy. This is one of the first books since the global financial crisis to specifically and comprehensively address the implications of the crisis for monetary and currency policy in emerging market economies, especially in Asia. Presenting a broad menu of policy options for financial reform and regulation, the book will be of great interest to finance experts and policymakers in the region as well as academics and researchers of financial and Asian economics as well as economic development.
Author: Ben S. Bernanke
Publisher: www.bnpublishing.com
ISBN: 9781607961055
Category :
Languages : en
Pages : 0
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Book Description
The success over the years in reducing inflation and, consequently, the average level of nominal interest rates has increased the likelihood that the nominal policy interest rate may become constrained by the zero lower bound. When that happens, a central bank can no longer stimulate aggregate demand by further interest-rate reductions and must rely on "non-standard" policy alternatives. To assess the potential effectiveness of such policies, we analyze the behavior of selected asset prices over short periods surrounding central bank statements or other types of financial or economic news and estimate "noarbitrage" models of the term structure for the United States and Japan. There is some evidence that central bank communications can help to shape public expectations of future policy actions and that asset purchases in large volume by a central bank would be able to affect the price or yield of the targeted asset.
