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The Influence of Japan’s Unsecured Overnight Call Rate on Bull and Bear Markets and Market Turns

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  • Mai Shibata

Abstract

This paper examines influence of interest rates on bull and bear markets in Tokyo stock exchange. Japan implemented a zero interest rate policy (ZIRP) from February 1999 to August 2000 and quantitative easing (QE) from March 2001 to March 2006. Because the relationship between Japanese equity price and interest rates apparently is inconsistent, it is needed to identify whether and how interest rates might affect a current market trend or initiate a market reversal. This study examines whether changes in Japan’s policy interest rate-the unsecured overnight call rate-prompt changes in the Tokyo Stock Price Index (TOPIX). The question we seek to answer is how TOPIX was affected by policies such as ZIRP and QE from bubble era until today. This paper shows that the call rate altered the direction of the TOPIX, market peaks and troughs appeared after call rates changed, and Japanese equities reacted more strongly to call rates during the 2000s. Copyright Springer Japan 2014

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  • Mai Shibata, 2014. "The Influence of Japan’s Unsecured Overnight Call Rate on Bull and Bear Markets and Market Turns," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 21(4), pages 331-349, November.
    • Handle: RePEc:kap:apfinm:v:21:y:2014:i:4:p:331-349
    DOI: 10.1007/s10690-014-9188-5
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    References listed on IDEAS

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    1. Prabhdeep Kaur & Jaspal Singh & Sidharath Seth, 2021. "Investigating the Dynamics of Exchange Traded Funds Across the Bear and Bull Markets: Evidence from Indian Equity ETFs," Vision, , vol. 25(3), pages 350-360, September.

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