Title: Fiscal confidence shocks and the market for the Japanese government bonds
Authors: Etsuro Shioji - Hitotsubashi University (Japan) [presenting]
Abstract: The question of fiscal sustainability is an important issue in many advanced countries, including Japan. With the mounting public debt, any news that could change general perceptions about government solvency could potentially have a large impact on the economy. We construct a new list of dates on which such news arrived in Japan, for the period between 2008 and 2017. This is done through careful readings of two major newspapers, Nikkei and Asahi. News can be classified into a few categories: (1) those related to introduction (or postponement) of a higher consumption tax rate; (2) those related to efforts to contain social security spending; (3) those about new big public construction plans; (4) governmental projections about long run fiscal balances; and (5) others. We then study what kind of effect (if any) those news have had on the market for the Japanese Government Bonds (JGBs), represented by daily returns on JGB futures and the JGB-VIX.