Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/163216
Authors: 
Fukuda, Shin-ichi
Year of Publication: 
2017
Series/Report no.: 
ADBI Working Paper Series 707
Abstract: 
The purpose of this paper is to explore the spillover effects Japan's negative interest rate policy (NIRP) had on Asian financial markets. Unlike the quantitative and qualitative monetary easing (QQE) without a negative interest rate, the NIRP not only had limited impacts on Japan's economy but also raised a serious concern about profitability of local financial institutions. It is thus likely that its spillover effects are very different from those of the QQE without a negative interest rate. In the analysis, we examine spillover effects on Asian stock markets. We find that Japan's long-term interest rate had significant negative effects on Asian stock prices during the NIRP period. We also find that the spillover effects were especially significant through a decline of excess returns in Japan's finance sector. The results imply that the NIRP that lowered the long-term rate below zero might have benefited Asian economies. We discuss that this might have happened because local financial institutions who lost their profit opportunities in domestic markets explored a new profit opportunity in emerging Asia after the NIRP was announced.
Subjects: 
negative interest rate
international spillover
emerging economies
stock markets in Asia
financial institutions
JEL: 
F10
F32
E52
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/3.0/igo/
Document Type: 
Working Paper

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