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The Bank of Japan's Monetary Policy and Bank Risk Premiums in the Money Market

Author

Listed:
  • Naohiko Baba

    (Financial Markets Department and Institute for Monetary and Economics Studies, Bank of Japan)

  • Motoharu Nakashima

    (Financial Markets Department, Bank of Japan)

  • Yousuke Shigemi

    (Secretariat of the Policy Board)

  • Kazuo Ueda

    (Faculty of Economics, University of Tokyo)

Abstract

Using the interest rates on Negotiable Certificate of Deposit issued by individual banks, we first show that under the Bank of Japan's Zero Interest Rate Policy and Quantitative Monetary Easing Policy, not just the levels of money market rates but also the dispersion of rates across banks have fallen to near zero. We next show that the fall in the dispersion of the rates is not fully explained by a fall in the dispersion of credit ratings of the banks. We also present some evidence on the role of the Bank of Japan's monetary policy in reducing risk premiums.

Suggested Citation

  • Naohiko Baba & Motoharu Nakashima & Yousuke Shigemi & Kazuo Ueda, 2005. "The Bank of Japan's Monetary Policy and Bank Risk Premiums in the Money Market," CIRJE F-Series CIRJE-F-374, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2005cf374
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    References listed on IDEAS

    as
    1. Baba, Naohiko & Nishioka, Shinichi & Oda, Nobuyuki & Shirakawa, Masaaki & Ueda, Kazuo & Ugai, Hiroshi, 2005. "Japan's Deflation, Problems in the Financial System, and Monetary Policy," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 23(1), pages 47-111, February.
    2. Shinichi Nishioka & Naohiko Baba, 2004. "Credit Risk Taking by Japanese Investors: Is Skewness Risk Priced in Japanese Corporate Bond Market?," Bank of Japan Working Paper Series 04-E-7, Bank of Japan.
    3. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
    4. Nobuyuki Oda & Kazuo Ueda, 2007. "The Effects Of The Bank Of Japan'S Zero Interest Rate Commitment And Quantitative Monetary Easing On The Yield Curve: A Macro‐Finance Approach," The Japanese Economic Review, Japanese Economic Association, vol. 58(3), pages 303-328, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • G0 - Financial Economics - - General
    • G00 - Financial Economics - - General - - - General

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