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<p>This paper constructs a composite indicator, the Corporate Bond Market Functioning Index (CBMFI), designed to comprehensively capture the functioning of Japan’s corporate bond market by aggregating information on transaction prices, issuance and trading volumes, and liquidity conditions in both the primary and secondary markets. The CBMFI successfully identifies periods of severe deterioration in market functioning, including the Global Financial Crisis (2008–2009) and the recent episode of global monetary tightening (2022–2023), during which functioning in both the primary and secondary markets declined sharply. With respect to its link to the real economy, we provide empirical evidence that improvements in the CBMFI, particularly those related to primary market functioning, have significant predictive power for future business fixed investment. We further show that the divergent dynamics between the primary and secondary market sub-indexes since 2013 reflect the effects of the Bank of Japan’s (BOJ’s) large-scale monetary easing, including corporate bond purchases, which primarily supported the primary market. Overall, our results indicate that the CBMFI sheds light on the role of the corporate bond market as a key transmission channel of monetary policy.</p>

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Measuring market functioning in Japan’s corporate bond market and its macroeconomic implications

  • 期刊论文

  • 发表日期：

    2026年5月25日

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  • Kaori Ochi,
  • Mitsuhiro Osada

摘要

This paper constructs a composite indicator, the Corporate Bond Market Functioning Index (CBMFI), designed to comprehensively capture the functioning of Japan’s corporate bond market by aggregating information on transaction prices, issuance and trading volumes, and liquidity conditions in both the primary and secondary markets. The CBMFI successfully identifies periods of severe deterioration in market functioning, including the Global Financial Crisis (2008–2009) and the recent episode of global monetary tightening (2022–2023), during which functioning in both the primary and secondary markets declined sharply. With respect to its link to the real economy, we provide empirical evidence that improvements in the CBMFI, particularly those related to primary market functioning, have significant predictive power for future business fixed investment. We further show that the divergent dynamics between the primary and secondary market sub-indexes since 2013 reflect the effects of the Bank of Japan’s (BOJ’s) large-scale monetary easing, including corporate bond purchases, which primarily supported the primary market. Overall, our results indicate that the CBMFI sheds light on the role of the corporate bond market as a key transmission channel of monetary policy.