Central bank balance sheets and long-term interest rates: Revisiting Japan's unconventional monetary policy experience

Jouchi Nakajima

No 758, Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This paper revisits the relationship between the central bank’s balance sheet and long term government bond yields, and reports estimates regarding the impact of the Bank of Japan’s government bond purchase programs on nominal yields. Following previous studies quantifying the portfolio balance effect of asset purchases in discussions of the Federal Reserve’s balance sheet policies, we estimate the relationship between the size and maturity structure of Japanese government bonds held by the public and the nominal 10-year yield. We find that the government bond purchase programs were effective in lowering the long-term interest rate and preventing an upward shift in the yield curve amid the government’s increased financing needs.

Keywords: Asset purchase program; Balance sheet policy; Portfolio balance effect; Unconventional monetary policy (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 G12 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2024-11
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hituec:758

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