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Return of the Japan premium in the abenomics period

Author

Listed:
  • Yoshiko Suzuki

    (Keio University)

Abstract

This study is an extension of the recent study by Suzuki (2016) that investigated factors contributing to the deviations from covered interest parity (CIP) in euro/dollar cross-currency swaps during the European debt crisis. The widening of the cross-currency basis or deviations from CIP has traditionally been associated with financial stress or credit risks. This study is unique as it not just looks into these traditional factors, but also investigates the influence of financial regulations, currency volatility and monetary policy divergence between the United States and Japan. While Abenomics urges yield-hungry Japanese investors to buy more U.S. dollar assets, new regulations discourage global banks from extending dollar loans via FX swaps.

Suggested Citation

  • Yoshiko Suzuki, 2017. "Return of the Japan premium in the abenomics period," Economics Bulletin, AccessEcon, vol. 37(2), pages 1401-1414.
    • Handle: RePEc:ebl:ecbull:eb-17-00120
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2017/Volume37/EB-17-V37-I2-P127.pdf
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    References listed on IDEAS

    as
    1. Yoshiko Suzuki, 2016. "European banks' funding realignment during the European debt crisis: impact of counterparty risk and funding liquidity on FX swap pricing," Economics Bulletin, AccessEcon, vol. 36(2), pages 696-703.
    2. repec:bla:econom:v:54:y:1987:i:216:p:429-38 is not listed on IDEAS
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    6. Covrig, Vicentiu & Low, Buen Sin & Melvin, Michael, 2004. "A Yen is Not a Yen: TIBOR/LIBOR and the Determinants of the Japan Premium," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(1), pages 193-208, March.
    7. Niall Coffey & Warren B. Hrung & Asani Sarkar, 2009. "Capital constraints, counterparty risk, and deviations from covered interest rate parity," Staff Reports 393, Federal Reserve Bank of New York.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Basis; Foreign Exchange Swaps; Covered Interest Parity; Monetary Policy Divergence; Financial Regulations;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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