90005181

open access

Accepted Manuscript

Quantitative Easing and Liquidity in the Japanese Government Bond Market

International Review of Finance

18(3)

463-475

Wiley

2018-09

2020-10-01

The “Quantitative and Qualitative Monetary Easing” enacted immediately after the inauguration of Bank of Japan Governor Kuroda brought violent fluctuations in the prices of government bonds and deteriorated market liquidity. Does a central bank's government bond purchasing policy generally reduce market liquidity? Do conditions exist that can prevent such a decrease? This study analyzes how the Bank of Japan's purchasing policy changes influenced market liquidity. The results reveal that three specific policy changes contributed significantly to improving market liquidity: (i) increased purchasing frequency; (ii) a decrease in the purchase amount per auction; and (iii) reduced variability in the purchase amounts. These policy changes facilitated investors' purchase schedule expectations and helped reduce market uncertainty. The evidence supports the theory that the effect of government bond purchasing policy on market liquidity depends on the market's informational environment.

Government Bond

学術雑誌論文

© 2017 International Review of Finance. This is the peer reviewed version of the following article: [International Review of Finance, 18(3):463-475, 2018], which has been published in final form at http://dx.doi.org/10.1111/irfi.12134. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.