Assessing the Risks to the Japanese Government Bond (JGB) Market

Author/Editor: Raphael W. Lam ; Kiichi Tokuoka
Publication Date: December 01, 2011
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: Despite the rise in public debt, Japanese Government Bond (JGB) yields have remained low and stable, supported by steady inflows from the household and corporate sectors, high domestic ownership of JGBs, and safe-haven flows from heightened sovereign risks in Europe. Over time, however, the market''s capacity to absorb new debt will likely shrink as population ages and risk appetite recovers. In the short term, a decline in fund supply from the corporate sector, where financial surpluses are abnormally high, and spillovers from global financial distress could push up JGB yields. Fiscal reforms to reduce public debt more quickly and lengthen the maturity of government bonds will help limit these risks.
Series: Working Paper No. 11/292
Subject(s): Banks | Corporate sector | Financial risk | Fiscal sustainability | Public debt | Risk management | Sovereign debt

Author's Keyword(s): Fiscal Sustainability | Sovereign Risk | Government yields | Financial Distress
Publication Date: December 01, 2011
ISBN/ISSN: 9781463927264/1018-5941 Format: Paper
Stock No: WPIEA2011292 Pages: 19
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