IDEAS home Printed from https://ideas.repec.org/p/cfi/fseres/cf419.html
   My bibliography  Save this paper

On the effect of Bank of Japan's outright purchase on the JGB yield curve

Author

Listed:
  • Masafumi Nakano

    (Graduate School of Economics, University of Tokyo)

  • Akihiko Takahashi

    (Faculty of Economics, University of Tokyo)

  • Soichiro Takahashi

    (Graduate School of Economics, University of Tokyo)

  • Takami Tokioka

    (GCI Asset Management)

Abstract

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 widening of 20-30 year spread.

Suggested Citation

  • Masafumi Nakano & Akihiko Takahashi & Soichiro Takahashi & Takami Tokioka, 2017. "On the effect of Bank of Japan's outright purchase on the JGB yield curve," CARF F-Series CARF-F-419, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf419
    as

    Download full text from publisher

    File URL: https://www.carf.e.u-tokyo.ac.jp/old/pdf/workingpaper/fseries/F419.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. James D. Hamilton & Jing Cynthia Wu, 2012. "The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(s1), pages 3-46, February.
    2. Ichiro Fukunaga & Naoya Kato & Junko Koeda, 2015. "Maturity Structure and Supply Factors in Japanese Government Bond Markets," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 33, pages 45-96, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Masafumi Nakano & Akihiko Takahashi & Soichiro Takahashi & Takami Tokioka, 2017. "On the Effect of Bank of Japan's Outright Purchase on the JGB Yield Curve ," CIRJE F-Series CIRJE-F-1062, CIRJE, Faculty of Economics, University of Tokyo.
    2. Junko Koeda & Yosuke Kimura, 2021. "Government Debt Maturity in Japan: 1965 to the Present," Working Papers 2103, Waseda University, Faculty of Political Science and Economics.
    3. Breckenfelder, Johannes & De Fiore, Fiorella & Andrade, Philippe & Karadi, Peter & Tristani, Oreste, 2016. "The ECB's asset purchase programme: an early assessment," Working Paper Series 1956, European Central Bank.
    4. Joseph E. Gagnon, 2016. "Quantitative Easing: An Underappreciated Success," Policy Briefs PB16-4, Peterson Institute for International Economics.
    5. Junko Koeda & Yoichi Ueno, 2022. "A Preferred Habitat View of Yield Curve Control," Bank of Japan Working Paper Series 22-E-7, Bank of Japan.
    6. Inaba, Kei-Ichiro, 2020. "Japan’s impactful augmentation of quantitative easing sovereign-bond purchases," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    7. Masafumi Nakano & Akihiko Takahashi & Soichiro Takahashi & Takami Tokioka, 2018. "On the Effect of Bank of Japan’s Outright Purchase on the JGB Yield Curve," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 25(1), pages 47-70, March.
    8. Martijn Boermans & Viacheslav Keshkov, 2018. "The impact of the ECB asset purchases on the European bond market structure: Granular evidence on ownership concentration," DNB Working Papers 590, Netherlands Central Bank, Research Department.
    9. Maciej Stefański, 2021. "Macroeconomic Effects of Quantitative Easing Using Mid-sized Bayesian Vector Autoregressions," KAE Working Papers 2021-068, Warsaw School of Economics, Collegium of Economic Analysis.
    10. Hosono, Kaoru & Miyakawa, Daisuke & Watanabe, Shuji, 2023. "Pricing implications of intervention and debt management in the primary market of Japanese government bonds," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).
    11. Bauer, Michael D. & Neely, Christopher J., 2014. "International channels of the Fed's unconventional monetary policy," Journal of International Money and Finance, Elsevier, vol. 44(C), pages 24-46.
    12. Eksi, Ozan & Tas, Bedri Kamil Onur, 2017. "Unconventional monetary policy and the stock market’s reaction to Federal Reserve policy actions," The North American Journal of Economics and Finance, Elsevier, vol. 40(C), pages 136-147.
    13. Gelfer, Sacha & Gibbs, Christopher G., 2023. "Measuring the effects of large-scale asset purchases: The role of international financial markets and the financial accelerator," Journal of International Money and Finance, Elsevier, vol. 131(C).
    14. Swanson, Eric T., 2021. "Measuring the effects of federal reserve forward guidance and asset purchases on financial markets," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 32-53.
    15. Christophe Blot & Jérôme Creel & Paul Hubert & Fabien Labondance, 2015. "The QE experience: Worth a try?," SciencePo Working papers Main hal-03568216, HAL.
    16. Sergeyev, Dmitriy & Iovino, Luigi, 2018. "Central Bank Balance Sheet Policies Without Rational Expectations," CEPR Discussion Papers 13100, C.E.P.R. Discussion Papers.
    17. James D. Hamilton, 2018. "The Efficacy of Large-Scale Asset Purchases When the Short-Term Interest Rate Is at Its Effective Lower Bound," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 49(2 (Fall)), pages 543-554.
    18. Belke, Ansgar & Gros, Daniel & Osowski, Thomas, 2016. "Did quantitative easing affect interest rates outside the US? New evidence based on interest rate differentials," CEPS Papers 11266, Centre for European Policy Studies.
    19. İshak Demi̇r & Burak A. Eroğlu & Seçi̇l Yildirim‐Karaman, 2022. "Heterogeneous Effects of Unconventional Monetary Policy on the Bond Yields across the Euro Area," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(5), pages 1425-1457, August.

    More about this item

    Keywords

    yield curve; QQE; Bank of Japan; scenario analysis; state space model; Kalman filter;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cfi:fseres:cf419. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/catokjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.