Monetary policy and the term structure of interest rates in Japan

Hamao, Yasushi; Campbell, John Y.

This paper studies the relation between short-term and long-term interest rates in Japan. The paper finds that there was a change in the behavior of the Japanese term structure in the mid-1980's. Short-term rates became less forecastable from their own past history; at the same time, the ability of the Japanese yield curve to forecast short-term rates increased. In this sense the expectations theory has become a more appropriate description of the Japanese term structure, even though the theory is rejected at conventional levels of statistical significance.

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Academic Units
Center on Japanese Economy and Business
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Center on Japanese Economy and Business Working Papers, 53
Published Here
February 8, 2011