Cover IMF Working Papers
Portfolio Rebalancing in Japan: Constraints and Implications for Quantitative Easing
Author: Mr. Serkan Arslanalp and Mr. Dennis P Botman
Series:
IMF Working Papers
Volume/Issue:
Volume 2015: Issue 186
Language:
English
Publication Date:
03 Aug 2015
DOI:
https://doi.org/10.5089/9781513557595.001
ISBN:
9781513557595
ISSN:
1018-5941
Pages:
22
Keywords:
WP; market; asset; bank; institutional investor; Japanese Government bond; quantitative easing; portfolio rebalancing; capital outflows; speed limits; net JGB purchase; quantitative easing policy; JGB Holdings; BoJ buying; BoJ purchase; reserve injection; BoJ communication; JGB market; Pension spending; Insurance companies; Bank credit; Securities; Unconventional monetary policies; Global; Southeast Asia; Asia and Pacific
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund