Working Paper
Determinants of the Japan premium: actions speak louder than words
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 events indicating concrete actions by the Japanese government reduced the Japan premium. We find that the failure of Yamaichi Securities, which was characterized by large undisclosed losses, contributed to increases in the Japan premium, while the failure of Hokkaido Takushoku did not.
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Bibliographic Information
Provider: Federal Reserve Bank of Boston
Part of Series: Working Papers
Publication Date: 1998
Number: 98-9