Determinants of the Japan Premium: Actions Speak Louder than Words

41 Pages Posted: 8 Dec 1999

See all articles by Joe Peek

Joe Peek

Federal Reserve Banks - Federal Reserve Bank of Boston

Eric S. Rosengren

Federal Reserve Bank of Boston - Supervision and Regulation

Multiple version iconThere are 2 versions of this paper

Date Written: June 1999

Abstract

Since August 1995, Japanese banks have had to pay a premium on Eurodollar and Euroyen interbank loans relative to their U.S. and U.K. competitors. This so-called Japan premium provides a market indicator of investor anxiety about the ability of Japanese banks to repay loans. We examine the determinants of the Japan premium and find that government announcements not associated with concrete actions had little impact. On the other hand, announcements of concrete actions by the Japanese government, such as injections of funds into the banking system, tended to have an effect on the size of the Japan premium.

JEL Classification: F33, F34, G21

Suggested Citation

Peek, Joe and Rosengren, Eric S., Determinants of the Japan Premium: Actions Speak Louder than Words (June 1999). Available at SSRN: https://ssrn.com/abstract=170768 or http://dx.doi.org/10.2139/ssrn.170768

Joe Peek (Contact Author)

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Eric S. Rosengren

Federal Reserve Bank of Boston - Supervision and Regulation ( email )

600 Atlantic Avenue
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Boston, MA 02210
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