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Quantitative and Qualitative Monetary Easing and Long-Term Interest Rates: The Effects through the Stock of "Net Supply" and Maturity Structure of Japanese Government Bonds

Author

Listed:
  • Ichiro Fukunaga

    (Bank of Japan)

  • Naoya Kato

    (Bank of Japan)

Abstract

The relationship between the supply-demand structure of government bond markets and long-term interest rates has been studied both theoretically and empirically, motivated by the implementation of large-scale government bond purchases by many central banks in advanced economies. Fukunaga, Kato, and Koeda (2015) examined the effects of changes in the holders and maturity structures of Japanese Government Bonds (JGBs) on the term structure of interest rates and the risk premium on long-term bonds. Using a regression approach and a term structure model approach, they confirmed that the "net supply" of JGBs-that is, the amount outstanding of JGBs issued (supplied) by the government minus that held (demanded) by investors with preferences for particular maturities, including the Bank of Japan (BOJ)-had statistically significant effects on long-term interest rates. They also reported calculations based on the two approaches showing that the BOJ's JGB purchases as part of its Quantitative and Qualitative Monetary Easing (QQE) had substantial effects on the long-term interest rates.

Suggested Citation

  • Ichiro Fukunaga & Naoya Kato, 2015. "Quantitative and Qualitative Monetary Easing and Long-Term Interest Rates: The Effects through the Stock of "Net Supply" and Maturity Structure of Japanese Government Bonds," Bank of Japan Research Laboratory Series 15-E-7, Bank of Japan.
    • Handle: RePEc:boj:bojlab:lab15e07
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    Cited by:

    1. Richhild Moessner, 2018. "Effects of asset purchases and financial stability measures on term premia in the euro area," Applied Economics, Taylor & Francis Journals, vol. 50(43), pages 4617-4631, September.

    More about this item

    Keywords

    Japanese Government Bonds; Term structure of interest rates; Preferred-habitat investors; Quantitative and Qualitative Monetary Easing;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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