Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/209181 
Year of Publication: 
2019
Series/Report no.: 
Working Paper No. 938
Publisher: 
Levy Economics Institute of Bard College, Annandale-on-Hudson, NY
Abstract: 
Nominal yields for Japanese government bonds (JGBs) have been remarkably low for several decades. Japanese government debt ratios have continued to increase amid a protracted period of stagnant nominal GDP, low inflation, and deflationary pressures. Many analysts are puzzled by the phenomenon of JGBs' low nominal yields because Japanese government debt ratios are elevated. However, this paper shows that the Bank of Japan's (BoJ) highly accommodative monetary policy is primarily responsible for keeping JGB yields low for a protracted period. This is consistent with Keynes's view that the short-term interest rate is the key driver of the longterm interest rate. This paper also relates the BoJ's monetary policy and economic developments in Japan to the evolution of JGBs' long-term interest rates.
Subjects: 
Japanese Government Bonds
Long-Term Interest Rates
Nominal Bond Yields
Monetary Policy
Bank of Japan
John Maynard Keynes
JEL: 
E43
E50
E58
E60
G10
G12
Document Type: 
Working Paper

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