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Portfolio Rebalancing Following the Bank of Japan's Government Bond Purchases: Empirical Analysis Using Data on Bank Loans and Investment Flows

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  • Masashi Saito

    (Bank of Japan)

  • Yoshihiko Hogen

    (Bank of Japan)

Abstract

This paper organizes facts and conducts an empirical analysis related to the portfolio rebalancing effect of government bond purchases by the Bank of Japan (BOJ). Our analysis uses data on bank loans and investment flows that are classified by type of entity, primarily taken from the Flow of Funds Accounts Statistics. Following the introduction of Quantitative and Qualitative Monetary Easing (QQE) by the BOJ in April 2013, entities other than the BOJ, as a group, have increased loans and investment in equities, mutual funds, and corporate bonds in Japan, while reducing their holdings of Japanese government bonds. Such portfolio rebalancing is mainly led by domestic banks and nonresidents. Meanwhile, so far, insurance companies, corporate pension funds, and public pensions have not reduced government bond holdings when the BOJ purchased government bonds. In addition to changes in financial and economic conditions, such as the balance sheet conditions of domestic banks and loan demand faced by domestic banks, purchases of government bonds with a longer remaining maturity by the BOJ have played a role in the increase in bank loans observed during the QQE period.

Suggested Citation

  • Masashi Saito & Yoshihiko Hogen, 2014. "Portfolio Rebalancing Following the Bank of Japan's Government Bond Purchases: Empirical Analysis Using Data on Bank Loans and Investment Flows," Bank of Japan Research Papers 14-06-19, Bank of Japan.
  • Handle: RePEc:boj:bojron:ron140619a
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    References listed on IDEAS

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    Cited by:

    1. Kenji Suganuma & Yoichi Ueno, 2018. "The Effects of the Bank of Japan fs Corporate and Government Bond Purchases on Credit Spreads," IMES Discussion Paper Series 18-E-04, Institute for Monetary and Economic Studies, Bank of Japan.
    2. Martijn Boermans & Robert Vermeulen, 2018. "Quantitative easing and preferred habitat investors in the euro area bond market," DNB Working Papers 586, Netherlands Central Bank, Research Department.
    3. Tatsuki Okamoto & Yoichi Matsubayashi, 2017. "Empirical Evidence from a Japanese Lending Survey within the TVP-VAR Framework: Does the Credit Channel Matter for Monetary Policy?," Discussion Papers 1709, Graduate School of Economics, Kobe University.
    4. Dunne, Peter & Everett, Mary & Stuart, Rebecca, 2015. "The Expanded Asset Purchase Programme – What, Why and How of Euro Area QE," Quarterly Bulletin Articles, Central Bank of Ireland, pages 61-71, July.

    More about this item

    Keywords

    portfolio rebalancing; government bond purchases; Quantitative and Qualitative Monetary Easing (QQE); Flow of Funds Accounts Statistics;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G2 - Financial Economics - - Financial Institutions and Services
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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