Working Paper: NBER ID: w7251
Authors: Joe Peek; Eric S. Rosengren
Abstract: Since August 1995, Japanese banks have had to pay a premium on Eurodollar and Euroyen interbank loans relative to their U.S. and U.K. competitors. This so-called Japan premium' provides a market indicator of investor anxiety about the ability of Japanese banks to repay loans. We examine the determinants of the Japan premium and find that government announcements not associated with concrete actions had little impact. On the other hand, announcements of concrete actions by the Japanese government, such as injections of funds into the banking system, tended to have an effect on the size of the Japan premium.
Keywords: No keywords provided
JEL Codes: F33; F34; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| government actions (H11) | decrease in the Japan premium (F29) |
| government announcements lacking concrete actions (E60) | little impact on the Japan premium (F69) |
| announcement of large previously undisclosed losses (G33) | increase in the Japan premium (F29) |
| actions encouraging mergers (G34) | increase in the Japan premium (F29) |
| perceived effectiveness of government policy (D78) | shaping investor confidence (G24) |