JGB Yield Curve and Macro-Financial Stability: ow Would a Steeper JGB Yield Curve Affect Bank Profitability? Japan

May 18, 2023

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Format: Chicago

Salih Fendoglu. JGB Yield Curve and Macro-Financial Stability: ow Would a Steeper JGB Yield Curve Affect Bank Profitability? Japan, (USA: International Monetary Fund, 2023) accessed December 21, 2024

Summary

Given that there is exceptionally high uncertainty around the domestic inflation outlook, allowing for greater flexibility in long-term Japanese Government Bond (JGB) yields by the Bank of Japan (BoJ) could be considered going forward. Against this background, this study empirically finds that a steeper JGB yield curve helps improve banks’ profitability, especially after a year lag, and the overall impact hinges on macroeconomic and financial market responses. A steeper JGB yield curve could also have spillovers on global yields. Financial sector policies to mitigate short-term vulnerabilities in case the JGB yield curve steepens could be considered, including by further strengthening engagement with financial institutions with relatively high exposure to interest rate movements, to better harness the benefits in the medium term.

Subject: Bank soundness, Financial sector policy and analysis, Financial services, International organization, Monetary policy, Yield curve

Keywords: Bank soundness, Global, JGB yield curve, Long-term Japanese Government Bond, Macro-Financial stability, Yield curve, Yield curve flattening, Yield curve slope

Publication Details

Pages:

13
Volume:

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DOI:

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Issue:

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Series:

Selected Issues Paper No. 2023/032
Stock No:

SIPEA2023032
ISBN:

9798400244032
ISSN:

2958-7875

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