A1486
Title: Is the market for the Japanese Government Bonds still insulated from external forces?
Authors: Etsuro Shioji - Chuo University (Japan) [presenting]
Abstract: How effective are monetary policies in insulating domestic markets for government bonds from foreign pressures? The question is addressed by studying the market for the Japanese government bonds (JGBs), where the Bank of Japan (BOJ) has been a dominant player since 2013. For that purpose, a new data set on the BOJ's estimated daily holdings of the JGBs, classified by both their terms and issuance dates, is utilized to construct a daily measure of the BOJ's JGB market intervention. This allows estimation of how daily changes in external market forces, represented by the US treasury bond yields, impact both the BOJ's bond purchases and the JGB yields. It is shown that the BOJ, when it chose to do so, could effectively shut out influences of foreign markets from the domestic bond market through aggressive bond purchases. On the flip side, the finding implies that, with the termination of the BOJ's unconventional monetary policies in 2024, the JGB market could now see enhanced influences of external forces.
