Maturity Structure and Supply Factors in Japanese Government Bond Markets

Using our constructed database on the amount outstanding of Japanese Government Bonds (JGBs) categorized by holder and remaining maturity, we examine the eects of changes in the holders and maturity structures on the term structure of interest rates and the risk premium on long-term bonds. Both approaches using single-equation regressions and a term structure model conrm that the net supply of JGBs, the issuance (supply) by the government minus the demand by the preferred-habitat investors including the Bank of Japan (BOJ), had signicant eects on long-term interest rates. The regression approach implies that the net supply eects were stronger in the zero interest rate periods, while this relationship was not found using the model approach. We also calculate the net supply eects of the BOJ's JGB purchases as part of its Quantitative and Quali-tative Monetary Easing and compare the results with those obtained from a simple event-study analysis