Some Empirical Models of Japanese Government Bond Yields Using Daily Data

Abstract

This paper models the dynamics of Japanese government bond (JGB) nominal yields using daily data. Models of government bond yields based on daily data, such as those presented in this paper, can be useful not only to investors and market analysts, but also to central bankers and other policymakers for assessing financial conditions and macroeconomic developments in real time. The paper shows that long-term JGB nominal yields can be modeled using the short-term interest rate on Treasury bills, the equity index, the exchange rate, commodity price index, and other key financial variables.

A Note Concerning the Dynamics of Government Bond Yields

“…Indeed, higher debt or deficit ratio is often associated with lower government bond yields. For example, in Japan, higher debt and deficit ratios are associated with lower government bond yields, contrary to the standard view (Akram & Das, 2014; Akram & Li, 2020a, 2020d, 2020e).…”

“…Akram and Li (2017, 2020c) and Akram and Das (2019a) modeled Treasury yields for the United States. Akram and Das (2014) and Akram and Li (2020a, 2020d, 2020e) examine the dynamics of Japanese government bonds, while Akram (2014, 2019) provides economic analysis on the impact of the Bank of Japan’s monetary policy on government bond yields. Akram and Das (2017) investigate the behavior of government bond yields for several eurozone countries.…”