Government Debt Maturity and the Term Structure in Japan

38 Pages Posted: 28 Jan 2022 Last revised: 17 Apr 2023

See all articles by Junko Koeda

Junko Koeda

Waseda University - School of Political Science and Economics

Yosuke Kimura

Tokyo Institute of Technology - School of Engineering

Date Written: January 22, 2022

Abstract

We construct a dataset of the maturity structure of Japanese government bonds and bond yields and structurally estimate a preferred-habitat term structure model for fiscal years 1975 and 2020. The model incorporates a stochastic trend common to the short rate and the maturity-composition factor, allowing changes in the long-run mean of the short rate. The study finds that a decrease in the maturity-composition factor, which is characterized by an increase in the share of short-term remaining maturity in Japan, has compressed the long-term bond yield in a persistently low interest rate environment, particularly over the past decade.

Keywords: term structure of interest rate; maturity structure; debt management; Japan; bond yield

JEL Classification: E43; E52; G11; G12; H63

Suggested Citation

Koeda, Junko and Kimura, Yosuke, Government Debt Maturity and the Term Structure in Japan (January 22, 2022). Available at SSRN: https://ssrn.com/abstract=4015576 or http://dx.doi.org/10.2139/ssrn.4015576

Junko Koeda (Contact Author)

Waseda University - School of Political Science and Economics ( email )

1-6-1 Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050, Tokyo 169-8050
Japan

Yosuke Kimura

Tokyo Institute of Technology - School of Engineering ( email )

Tokyo
Japan

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