Assessing the Risks to the Japanese Government Bond (JGB) Market
December 1, 2011
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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.
Subject: Banking, Corporate sector, Credit default swap, Economic sectors, Financial institutions, Government securities, Loans, Money, Public debt
Keywords: Corporate sector, Credit default swap, Financial Distress, Fiscal Sustainability, Global, Government securities, Government yields, JGB cash market, JGB CDS contract, JGB holding, JGB market, JGB sell-off, JGB yield, Loans, maturity JGBS, Sovereign Risk, WP, yield
Pages:
19
Volume:
2011
DOI:
Issue:
292
Series:
Working Paper No. 2011/292
Stock No:
WPIEA2011292
ISBN:
9781463927264
ISSN:
1018-5941
