A Yen is not a Yen: TIBOR/LIBOR and the determinants of the 'Japan Premium'
AbstractPricing in the Euroyen market is based on LIBOR, the London Interbank Offer Rate, set at 11am London time or TIBOR, the Tokyo Interbank Offer Rate, set at 11am Tokyo time. Since the TIBOR panel is dominated by Tokyo city banks while the LIBOR panel is dominated by non-Japanese banks, the changing TIBOR-LIBOR spread reflects the credit risk associated with Japanese banks or the 'Japan premium.' In this paper, we investigate the determinants of this 'Japan premium.' The spread is modeled as a function of determinants of bank default and firm value suggested by a theory of credit spreads. Our results suggest that systematic variation in the spread can be explained by interest rate and stock price effects along with public information flows of good and bad news regarding Japanese banking, with a separate individual role for Japanese bank credit downgrades and upgrades.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, W. P. Carey School of Business, Arizona State University in its series Working Papers with number 2133360.
Date of creation:
Date of revision:
Other versions of this item:
- Covrig, Vicentiu & Low, Buen Sin & Melvin, Michael, 2004. "A Yen is Not a Yen: TIBOR/LIBOR and the Determinants of the Japan Premium," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(01), pages 193-208, March.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- John B. Taylor & John C. Williams, 2009.
"A black swan in the money market,"
Federal Reserve Bank of San Francisco, issue Jan.
- Cho-Hoi Hui & Hans Genberg & Tsz-Kin Chung, 2009.
"Funding Liquidity Risk and Deviations from Interest-Rate Parity During the Financial Crisis of 2007-2009,"
0913, Hong Kong Monetary Authority.
- Cho‐Hoi Hui & Hans Genberg & Tsz‐Kin Chung, 2011. "Funding liquidity risk and deviations from interest‐rate parity during the financial crisis of 2007–2009," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 16(4), pages 307-323, October.
- Masami Imai, 2006. "Market Discipline and Deposit Insurance Reform in Japan," Wesleyan Economics Working Papers 2006-007, Wesleyan University, Department of Economics.
- Naohiko Baba & Frank Packer, 2009. "From turmoil to crisis: dislocations in the FX swap market before and after the failure of Lehman Brothers," BIS Working Papers 285, Bank for International Settlements.
- Fukuda, Shin-ichi, 2012. "Market-specific and currency-specific risk during the global financial crisis: Evidence from the interbank markets in Tokyo and London," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3185-3196.
- Imai, Masami, 2006. "Market discipline and deposit insurance reform in Japan," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3433-3452, December.
- Naohiko Baba & Masakazu Inada, 2007. "Price Discovery of Credit Spreads for Japanese Mega-Banks: Subordinated Bond and CDS," IMES Discussion Paper Series 07-E-06, Institute for Monetary and Economic Studies, Bank of Japan.
- Baba, Naohiko & Packer, Frank, 2009. "From turmoil to crisis: Dislocations in the FX swap market before and after the failure of Lehman Brothers," Journal of International Money and Finance, Elsevier, vol. 28(8), pages 1350-1374, December.
- Poskitt, Russell & Waller, Bradley, 2011. "Do liquidity or credit effects explain the behavior of the BKBM-LIBOR differential?," Pacific-Basin Finance Journal, Elsevier, vol. 19(2), pages 173-193, April.
- Shin-ichi Fukuda & Mariko Tanaka, 2013. "Financial Crises and Risk Premiums in International Interbank Markets," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 9(1), pages 117-138, January.
- Naohiko Baba & Frank Packer, 2008. "Interpreting deviations from covered interest parity during the financial market turmoil of 2007-08," BIS Working Papers 267, Bank for International Settlements.
- Baba, Naohiko & Packer, Frank, 2009. "Interpreting deviations from covered interest parity during the financial market turmoil of 2007-08," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 1953-1962, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Steve Salik).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.