{
  "title": "Portfolio Rebalancing in Japan: Constraints and Implications for Quantitative Easing",
  "publication": "IMF Working Papers, August 3, 2015",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/portfolio-rebalancing-in-japan-constraints-and-implications-for-quantitative-easing-43161",
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  "summary": "Portfolio rebalancing is a key transmission channel of quantitative easing in Japan. We construct a realistic rebalancing scenario, which suggests that the BoJ may need to taper its JGB purchases in 2017 or 2018, given collateral needs of banks, asset-liability management constraints of insurers, an",
  "sections": [
    {
      "heading": "Summary of key findings",
      "content": "- Portfolio rebalancing is identified as a key transmission channel of quantitative easing in Japan.\n- A constructed realistic rebalancing scenario suggests that the Bank of Japan (BoJ) may need to taper its JGB purchases in 2017 or 2018, given:\n  - collateral needs of banks,\n  - asset-liability management constraints of insurers,\n  - announced asset allocation targets of major pension funds.\n- Despite these constraints, the BoJ could continue to deliver monetary stimulus by:\n  - extending the maturity of its JGB purchases, or\n  - scaling up private asset purchases.\n- The paper quantifies the impact of rebalancing on capital outflows and discusses JGB market signals that can indicate when limits are within reach."
    },
    {
      "heading": "Quantitative projections and scenarios",
      "content": "- Timing projection: tapering of JGB purchases may be required in 2017 or 2018.\n- The study constructs a \"realistic rebalancing scenario\" (details in the paper) that leads to the above timing implication.\n- The paper quantifies the effect of portfolio rebalancing on capital outflows (quantitative details available in the full working paper)."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- If portfolio rebalancing limits are approached, the BoJ can:\n  - taper net JGB purchases, and/or\n  - extend the maturity composition of JGB purchases to maintain stimulus effectiveness, and/or\n  - scale up purchases of private assets to sustain monetary accommodation.\n- Monitor JGB market signals as indicators that portfolio rebalancing limits may be within reach."
    },
    {
      "heading": "Institutional and market constraints examined",
      "content": "- Collateral needs of banks.\n- Asset-liability management constraints of insurers.\n- Announced asset allocation targets of major pension funds.\n- Implications for capital outflows from portfolio rebalancing dynamics."
    },
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      "content": "- Authors: Serkan Arslanalp, Dennis P Botman\n- Date: August 3, 2015\n- Series: IMF Working Papers, Working Paper No. 2015/186\n- Pages: 22\n- DOI: https://doi.org/10.5089/9781513557595.001\n\nIMF Working Paper: \"Portfolio Rebalancing in Japan: Constraints and Implications for Quantitative Easing\", Serkan Arslanalp and Dennis P Botman, August 3, 2015.\n\n---\n\n Content in this bundle\n\n- Wp15186\n  - Wp15186 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Wp15186 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/portfolio-rebalancing-in-japan-constraints-and-implications-for-quantitative-easing-43161"
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    "Authors: Serkan Arslanalp, Dennis P Botman",
    "Published: August 3, 2015",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513557595.001",
    "Portfolio rebalancing is identified as a key transmission channel of quantitative easing in Japan.",
    "A constructed realistic rebalancing scenario suggests that the Bank of Japan (BoJ) may need to taper its JGB purchases in 2017 or 2018, given:",
    "Despite these constraints, the BoJ could continue to deliver monetary stimulus by:",
    "The paper quantifies the impact of rebalancing on capital outflows and discusses JGB market signals that can indicate when limits are within reach.",
    "Timing projection: tapering of JGB purchases may be required in 2017 or 2018.",
    "The study constructs a \"realistic rebalancing scenario\" (details in the paper) that leads to the above timing implication.",
    "The paper quantifies the effect of portfolio rebalancing on capital outflows (quantitative details available in the full working paper).",
    "If portfolio rebalancing limits are approached, the BoJ can:",
    "Monitor JGB market signals as indicators that portfolio rebalancing limits may be within reach.",
    "Collateral needs of banks.",
    "Asset-liability management constraints of insurers.",
    "Announced asset allocation targets of major pension funds.",
    "Implications for capital outflows from portfolio rebalancing dynamics.",
    "Authors: Serkan Arslanalp, Dennis P Botman",
    "Date: August 3, 2015",
    "Series: IMF Working Papers, Working Paper No. 2015/186",
    "Pages: 22",
    "DOI: https://doi.org/10.5089/9781513557595.001",
    "**Wp15186**"
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