Title: Effects of corporate bond purchases and their transmission mechanism: The case of Japan
Authors: Yoichi Ueno - Bank of Japan (Japan) [presenting]
Kenji Suganuma - Bank of Japan (Japan)
Abstract: The purpose is to examine the effect and transmission mechanism of corporate and government bond purchases by the Bank of Japan on Japanese firms credit spreads. Exploiting both individual bond data and firm level data, we find that the bond purchases have significant effects on lowering the spreads through various channels: default risk premium channel, local and global supply channels, and risk taking channel. We also find that the risk appetite of financial intermediaries change the magnitude of the effects through the supply channels. Quantifying the effects on the spreads in various ratings or maturities, we find that the purchases of corporate and government bond have influence more on lower-grade and longer-maturity credit spreads. Furthermore, given the same amount of purchase, the corporate bond purchase has larger effect on lowering the spreads than the government bond purchase.