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Portfolio Rebalancing in Japan; Constraints and Implications for Quantitative Easing


  • Serkan Arslanalp
  • Dennis P Botman


Portfolio rebalancing is a key transmission channel of quantitative easing in Japan. We construct a realistic rebalancing scenario, which suggests that the BoJ may need to taper its JGB purchases in 2017 or 2018, given collateral needs of banks, asset-liability management constraints of insurers, and announced asset allocation targets of major pension funds. Nonetheless, the BoJ could deliver continued monetary stimulus by extending the maturity of its JGB purchases or by scaling up private asset purchases. We quantify the impact of rebalancing on capital outflows and discuss JGB market signals that can be indicative of limits being within reach.

Suggested Citation

  • Serkan Arslanalp & Dennis P Botman, 2015. "Portfolio Rebalancing in Japan; Constraints and Implications for Quantitative Easing," IMF Working Papers 15/186, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:15/186

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    References listed on IDEAS

    1. Koichiro Kamada & Jouchi Nakajima, 2014. "On the reliability of Japanese inflation expectations using purchasing power parity," Economic Analysis and Policy, Elsevier, vol. 44(3), pages 259-265.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. The IMF Just Confirmed The Nightmare Scenario For Central Banks Is Now In Play
      by Tyler Durden in Zero Hedge on 2015-09-07 04:59:46
    2. Former IMF Chief Economist Admits Japan's "Endgame" Scenario Is Now In Play
      by Tyler Durden in Zero Hedge on 2016-04-12 04:16:57


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    Cited by:

    1. Haldane, Andrew & Roberts-Sklar, Matt & Wieladek, Tomasz & Young, Chris, 2016. "QE: the story so far," CEPR Discussion Papers 11691, C.E.P.R. Discussion Papers.
    2. Ikuo Saito, 2016. "Fading Ricardian Equivalence in Ageing Japan," IMF Working Papers 16/194, International Monetary Fund.
    3. Yoshiko Suzuki, 2017. "Return of the Japan premium in the abenomics period," Economics Bulletin, AccessEcon, vol. 37(2), pages 1401-1414.
    4. Martijn Boermans & Viacheslav Keshkov, 2018. "The impact of the ECB asset purchases on the European bond market structure: Granular evidence on ownership concentration," DNB Working Papers 590, Netherlands Central Bank, Research Department.


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