To read the full version of this content please select one of the options below:

Short-term Cross-currency Basis Swap and Japanese Government Bond Markets under Non-traditional Monetary Policy

Asia-Pacific Contemporary Finance and Development

ISBN: 978-1-78973-274-0, eISBN: 978-1-78973-273-3

ISSN: 1571-0386

Publication date: 19 June 2019

Abstract

The five-, 10-, and 20-year yields of Japanese government bonds (JGBs) co-move with the six- and 12-month basis swap rates under the quantitative and qualitative easing policy regime introduced by the Bank of Japan (BOJ). The 10- and 20-year JGB yields are in a one-to-one relationship with the six- and 12-month basis swap rates. A cheaper yen gives foreign investors strong incentives to buy 10- and 20-year JGBs under the quantitative and qualitative easing policy regime. A cheaper yen also gives foreign investors some incentives to buy five-year JGBs under the same regime. However, JGB yield does not co-move with basis swap rate under the negative interest rate policy regime. After the BOJ introduced the negative interest rate policy, the trend observed under the quantitative and qualitative easing policy regime changed.

Keywords

Acknowledgements

Acknowledgments

This research was supported by a Grant-in Aid from the Zengin Foundation for Studies on Economics and Finance. The author highly appreciates the financial support.

Citation

Ito, T. (2019), "Short-term Cross-currency Basis Swap and Japanese Government Bond Markets under Non-traditional Monetary Policy", Asia-Pacific Contemporary Finance and Development (International Symposia in Economic Theory and Econometrics, Vol. 26), Emerald Publishing Limited, Bingley, pp. 27-39. https://doi.org/10.1108/S1571-038620190000026002

Publisher

:

Emerald Publishing Limited

Copyright © 2019 Emerald Publishing Limited