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Skewed Interest Rate Expectations and Effects of Central Banks' Market Operations: Empirical Findings Using Granular Transaction Data

日本語

May 16, 2025
Kohei Maehashi*1
Daisuke Miyakawa*2
Takatoshi Sasaki*3
Taihei Sone*4

Abstract

Using trade repository data on transaction records of Japanese yen-denominated overnight index swap, we estimate individual market participants' expectations on future interest rates and document their time-variant distribution with its higher order moments. By leveraging this novel information, we implement quantitative exercises to verify the state-dependent effects of the Bank of Japan (BoJ)'s outright purchase of Japanese Government Bonds (JGBs) on the JGB yields conditional on the moments of this expectation distribution. We find that the BoJ's fixed-rate purchase operation resulted in a larger reduction of the JGB yields when the expectation distribution on future interest rates was skewed more positively. This empirical result implies the usefulness of the estimated expectation distribution for central banks to conduct market operations effectively.

JEL classification
E43, E58, G15, G20.

Keywords
Interest rate expectations, skewness, granular data, trade repository, overnight index swap, market operation

The authors thank Kenji Fujita, Noritaka Fukuma, Joji Ide, Sohei Kaihatsu, Mikari Kashima, Tomiyuki Kitamura, Makoto Minegishi, Kosuke Nishino and Masato Takahashi for their valuable comments and discussions. The authors gratefully acknowledge the provision of data from Japan's Financial Services Agency. Any errors in this paper are those of the authors themselves. Additionally, the views expressed herein are those of the authors and do not necessarily reflect the official views of the Bank of Japan.

  1. *1Financial Markets Department, Bank of Japan
    E-mail : kouhei.maehashi@boj.or.jp
  2. *2Financial Markets Department, Bank of Japan, and School of Commerce, Waseda University
    E-mail : daisuke.miyakawa@boj.or.jp
  3. *3Financial Markets Department, Bank of Japan
    E-mail : takatoshi.sasaki@boj.or.jp
  4. *4Financial Markets Department, Bank of Japan (currently, Personnel and Corporate Affairs Department)
    E-mail : taihei.sone@boj.or.jp

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