Portfolio Rebalancing and Financial Performance of Banks in Japan since Quantitative Easing-2: Exploring Impacts of Post-Covid-19 QE Tapering
| Project/Area Number |
22K01570
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Multi-year Fund |
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| Section | 一般 |
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| Review Section |
Basic Section 07060:Money and finance-related
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| Research Institution | Ritsumeikan Asia Pacific University |
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Principal Investigator |
BARAI Munim 立命館アジア太平洋大学, 国際経営学部, 教授 (50584017)
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| Project Period (FY) |
2022-04-01 – 2025-03-31
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| Project Status |
Granted (Fiscal Year 2022)
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| Budget Amount *help |
¥4,160,000 (Direct Cost: ¥3,200,000、Indirect Cost: ¥960,000)
Fiscal Year 2024: ¥1,300,000 (Direct Cost: ¥1,000,000、Indirect Cost: ¥300,000)
Fiscal Year 2023: ¥1,690,000 (Direct Cost: ¥1,300,000、Indirect Cost: ¥390,000)
Fiscal Year 2022: ¥1,170,000 (Direct Cost: ¥900,000、Indirect Cost: ¥270,000)
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| Keywords | Quantitative Easing / Bank of Japan / Interest Rate / Covid-19 / Financial Performance / Japanese Banks / Quantitative Easing (QE) / Portfolio Rebalancing / Tapering |
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| Outline of Research at the Start |
In 2013, BOJ started infusing money into the economy under QE2 policy to start growth and overcome deflation. To address the impacts of low interest rates due to QE2 and low borrowing demand, they started rebalancing their portfolios from safe assets to risky assets.Though BOJ is still pursuing QE2 to overcome the Covid-19 challenge, it has the intent to a gradual tapering of QE post-Covid-19 context. This research aims to investigate the post-2013 QE-induced changes in the portfolio distribution and financial performance and possible impacts of banks due to the rolling back of the QE policy.
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| Outline of Annual Research Achievements |
This research was proposed to make an in-depth investigation of QE2’s impacts on Japanese banks since 2013 and the prospective fallouts of QE tapering on them. Keeping this broader objective in mind, AY 2022 has remained highly successful in making progress with the research. During the year, I was able to finish writing a working paper and get one research paper published in a Scopus-listed journal. Both publications focused on reviewing the BOJ’s QE-2 monetary policy since 2013 and how this policy has created challenges for banks through low interest rates, unsustainable loan-deposit ratios through high deposit accumulation, and COVID-19. Moreover, the research has found the initial financial impacts on commercial banks in Japan in terms of their return on assets, return on equity, interest margin, the status of non-performing assets, etc. The activities involved in the research include a literature review, an experience survey with a former BOJ executive, field visits, participating in a few seminars, and giving talks supported by the outcomes of the research.
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| Current Status of Research Progress |
Current Status of Research Progress
2: Research has progressed on the whole more than it was originally planned.
Reason
In terms of the research achievements and activities performed, AY2022 remained more than satisfactory, except probably for visiting the fields due to the existing restrictions related to COVID-19. During this time, the research has successfully identified QE-related issues like the behavior of interest rates in the banking sector since 2013, the causes of a loan-deposit ratio imbalance in Japanese banks, and their domestic portfolio diversification since 2013. In 2023, the focus has shifted to exploring the possible QE tapering move by the BOJ in the post-Covid-19 phase. But the war in Ukraine seems to have ramifications for Japanese banks, which needed to be factored in. Moreover, the change of the BOJ governor has added a new element of unpredictability to the entire QE operation in Japan. The research is continually trying to adjust to the newer developments in 2023 and will try to find the impacts of these developments on Japanese banks’ national portfolios. In that way, the research is progressing satisfactorily along the lines drawn in the submitted proposal.
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| Strategy for Future Research Activity |
I have the following plans for the research for AY2023 and beyond.
1. Making further experience surveys with various bankers and researchers about the future of BOJ's quantitative easing monetary plan. I will focus on the possible changes in the policy by the new governor in 2023 and onward.
2. Explore developments of the FED in the US and the ECB in the European Union with their basic interest rates and reactions of BOJ.
3. Explore the financial implications of domestic and international policy changes on commercial banks in Japan. The Japanese banks may see impacts on the compositions in their assets and liabilities portfolios, ROA (Return on Assets), ROE (Return on Equity), loan-deposits ratios, operating performances and so on. All these indicators will be explored and analyzed in 2023 and beyond.
4. In 2023, I am going start writing another working paper on the influence of the external financial factors (including the impact of Ukraine War) on the banking sector of Japan. I will initiate the process of the QE's, Covid-19's and Ukraine War's impact on the purchase of Collateralized Loan Obligations (CLO) by Japanese banks.
5. I will continue to write research papers for journal in the area of my research and try to get them published in different international journals. At the same time, I will participate national and international conferences and seminars to disseminate the research results.
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Report
(1 results)
Research Products
(3 results)
