{
  "title": "JGB Yield Curve and Macro-Financial Stability: ow Would a Steeper JGB Yield Curve Affect Bank Profitability? Japan",
  "publication": "Selected Issues Papers, May 18, 2023",
  "sourceUrl": "https://www.imf.org/en/publications/selected-issues-papers/issues/2023/05/18/jgb-yield-curve-and-macro-financial-stability-ow-would-a-steeper-jgb-yield-curve-affect-533523",
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  "summary": "Given that there is exceptionally high uncertainty around the domestic inflation outlook, allowing for greater flexibility in long-term Japanese Government Bond (JGB) yields by the Bank of Japan (BoJ) could be considered going forward.",
  "sections": [
    {
      "heading": "Summary findings",
      "content": "- Given that there is exceptionally high uncertainty around the domestic inflation outlook, allowing for greater flexibility in long-term Japanese Government Bond (JGB) yields by the Bank of Japan (BoJ) could be considered going forward.\n- This study empirically finds that a steeper JGB yield curve helps improve banks’ profitability, especially after a year lag.\n- The overall impact of a steeper JGB yield curve hinges on macroeconomic and financial market responses.\n- A steeper JGB yield curve could also have spillovers on global yields."
    },
    {
      "heading": "Policy recommendations and financial sector measures",
      "content": "- Consider allowing greater flexibility in long-term JGB yields by the BoJ, given domestic inflation uncertainty.\n- Consider financial sector policies to mitigate short-term vulnerabilities in case the JGB yield curve steepens.\n- Further strengthen engagement with financial institutions with relatively high exposure to interest rate movements to better harness the benefits in the medium term."
    },
    {
      "heading": "Scope and context",
      "content": "- Subject areas: Bank soundness, Financial sector policy and analysis, Financial services, International organization, Monetary policy, Yield curve.\n- Keywords: Bank soundness, Global, JGB yield curve, long-term Japanese Government Bond, macro-Financial stability, Yield curve, yield curve flattening, yield curve slope.\n- Author and date: By Salih Fendoglu; May 18, 2023.\n\nSource: IMF Selected Issues Paper — \"JGB Yield Curve and Macro-Financial Stability: ow Would a Steeper JGB Yield Curve Affect Bank Profitability? Japan\" (Salih Fendoglu, May 18, 2023).\n\n---\n\n Content in this bundle\n\n- Sipea2023032\n  - Sipea2023032 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Sipea2023032 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/selected-issues-papers/issues/2023/05/18/jgb-yield-curve-and-macro-financial-stability-ow-would-a-steeper-jgb-yield-curve-affect-533523"
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    "Authors: Salih Fendoglu",
    "Published: May 18, 2023",
    "Series: Selected Issues Papers",
    "DOI: https://doi.org/10.5089/9798400244032.018",
    "Given that there is exceptionally high uncertainty around the domestic inflation outlook, allowing for greater flexibility in long-term Japanese Government Bond (JGB) yields by the Bank of Japan (BoJ) could be considered going forward.",
    "This study empirically finds that a steeper JGB yield curve helps improve banks’ profitability, especially after a year lag.",
    "The overall impact of a steeper JGB yield curve hinges on macroeconomic and financial market responses.",
    "A steeper JGB yield curve could also have spillovers on global yields.",
    "Consider allowing greater flexibility in long-term JGB yields by the BoJ, given domestic inflation uncertainty.",
    "Consider financial sector policies to mitigate short-term vulnerabilities in case the JGB yield curve steepens.",
    "Further strengthen engagement with financial institutions with relatively high exposure to interest rate movements to better harness the benefits in the medium term.",
    "Subject areas: Bank soundness, Financial sector policy and analysis, Financial services, International organization, Monetary policy, Yield curve.",
    "Keywords: Bank soundness, Global, JGB yield curve, long-term Japanese Government Bond, macro-Financial stability, Yield curve, yield curve flattening, yield curve slope.",
    "Author and date: By Salih Fendoglu; May 18, 2023.",
    "**Sipea2023032**"
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