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The Effects of the Bank of Japan's Corporate and Government Bond Purchases on Credit Spreads

Author

Listed:
  • Kenji Suganuma

    (Deputy Director and Economist, Institute for Monetary and Economic Studies (currently Monetary Affairs Department), Bank of Japan (E-mail: kenji.suganuma@boj.or.jp))

  • Yoichi Ueno

    (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: youichi.ueno@boj.or.jp))

Abstract

We examine the effects of corporate and government bond purchases by the Bank of Japan (BOJ) on Japanese firms' credit spreads. Using a micro dataset covering 5,614 corporate bonds over the period from 1997 to 2016, we empirically show that credit spreads are explained by the risk-taking channel and the local and global supply channels, in addition to the conventional default risk channel. We quantify the effects of the BOJ's bond purchases on credit spreads through these three channels. In so doing, we emphasize that policy effects through the local and global supply channels crucially depend on the degree of risk appetite at the financial institutions.

Suggested Citation

  • Kenji Suganuma & Yoichi Ueno, 2018. "The Effects of the Bank of Japan's Corporate and Government Bond Purchases on Credit Spreads," IMES Discussion Paper Series 18-E-04, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:18-e-04
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    References listed on IDEAS

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    Cited by:

    1. Linh, Nguyen Thuy, 2021. "Spillovers of the Bank of Japan’s Exchange Traded Fund and Corporate Bond Purchases," TDB-CAREE Discussion Paper Series E-2021-02, Teikoku Databank Center for Advanced Empirical Research on Enterprise and Economy, Graduate School of Economics, Hitotsubashi University.
    2. Gilchrist, Simon & Wei, Bin & Yue, Vivian Z. & Zakrajšek, Egon, 2024. "The Fed takes on corporate credit risk: An analysis of the efficacy of the SMCCF," Journal of Monetary Economics, Elsevier, vol. 146(C).
    3. Linh, Nguyen Thuy, 2021. "The Impact of the Bank of Japan’s Exchange Traded Fund and Corporate Bond Purchases on Firms’ Capital Structure," RCESR Discussion Paper Series DP21-1, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.
    4. Okimoto, Tatsuyoshi & Takaoka, Sumiko, 2020. "No-arbitrage determinants of credit spread curves under the unconventional monetary policy regime in Japan," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 64(C).

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    More about this item

    Keywords

    Credit spreads; Default risk channel; Local supply channel; Global supply channel; Risk taking channel; Monetary policy;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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