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

Kenji Suganuma and Yoichi Ueno
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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)

No 18-E-04, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

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.

Keywords: Credit spreads; Default risk channel; Local supply channel; Global supply channel; Risk taking channel; Monetary policy (search for similar items in EconPapers)
JEL-codes: E44 E58 G12 (search for similar items in EconPapers)
Date: 2018-06
New Economics Papers: this item is included in nep-cba and nep-mac
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ime:imedps:18-e-04

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