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Monetary Policy and the Term Structure of Interest Rates in Japan

Author

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  • R. Anton Braun

    (Faculty of Economics, University of Tokyo)

  • Etsuro Shioji

    (Yokohama National University)

Abstract

This paper uses Japanese data to investigate the relationship between monetary policy and the yield curve. We compare and contrast the role of monetary policy under two perspectives. Under the liquidity effect maintained hypothesis monetary policy is an ineffective tool in altering long-term bond yields and doesn't account for much of the long-term variation in bonds of any maturity. Under the sticky price maintained hypothesis, however, monetary policy has large and persistent effects on the yield curve producing large hump-shaped responses in yields of all maturities. Moreover, under this hypothesis shocks to monetary policy and other macroeconomic variables are important sources of variation in long-term yields jointly accounting for 50% of the long-run variance of the 5-year yield.

Suggested Citation

  • R. Anton Braun & Etsuro Shioji, 2003. "Monetary Policy and the Term Structure of Interest Rates in Japan," CIRJE F-Series CIRJE-F-252, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2003cf252
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    References listed on IDEAS

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    Cited by:

    1. Kensuke Miyazawa & Kengo Nutahara, 2013. "Dynamic Effects of Fiscal Policy in Japan: Evidence from a Structural VAR with Sign Restrictions," CIGS Working Paper Series 13-006E, The Canon Institute for Global Studies.
    2. Masahiko Shibamoto, 2016. "Empirical Assessment of the Impact of Monetary Policy Communication on the Financial Market," Discussion Paper Series DP2016-19, Research Institute for Economics & Business Administration, Kobe University.
    3. Masahiko Shibamoto, 2016. "Source of Underestimation of the Monetary Policy Effect: Re-Examination of the Policy Effectiveness in Japan's 1990s," Manchester School, University of Manchester, vol. 84(6), pages 795-810, December.
    4. Masahiko Shibamoto & Wataru Takahashi & Takashi Kamihigashi, 2023. "Japan’s monetary policy: a literature review and empirical assessment," Journal of Computational Social Science, Springer, vol. 6(2), pages 1215-1254, October.
    5. Forgha Godfrey NJIMANTED & Daniel AKUME & Emmanuel Mbella MUKETE, 2016. "The Impact of Key Monetary Variables on the Economic Growth of the CEMAC Zone," Expert Journal of Economics, Sprint Investify, vol. 4(2), pages 54-67.
    6. Shin-ichi Fukuda, 2010. "The Rise of China and the Sustained Recovery of Japan," Chapters, in: Takatoshi Ito & Chin Hee Hahn (ed.), The Rise of China and Structural Changes in Korea and Asia, chapter 9, Edward Elgar Publishing.
    7. Filippo COSSETTI & Francesco GUIDI, 2009. "ECB Monetary Policy and Term Structure of Interest Rates in the Euro Area: an Empirical Analysis," Working Papers 334, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    8. Hiroyuki Kubota & Mototsugu Shintani, 2023. "Macroeconomic Effects of Monetary Policy in Japan: An Analysis Using Interest Rate Futures Surprises," CARF F-Series CARF-F-555, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    9. Shigeru Iwata, 2010. "Monetary Policy and the Term Structure of Interest Rates When Short-Term Rates Are Close to Zero," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 28, pages 59-78, November.
    10. Hiroyuki Kubota & Mototsugu Shintani, 2020. "High-frequency Identification of Unconventional Monetary Policy Shocks in Japan," CARF F-Series CARF-F-502, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    11. Jonathan A Batten & Peter G Szilagyi, 2012. "Comments on Qianying Chen, Andrew Filardo, Dong He and Feng Zhu's paper "The impact of central bank balance sheet policies on the emerging economies"," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 265-284, Bank for International Settlements.

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