Major: Bank of Japan Means Business on Bonds

The video discusses the Japanese government's decision to cap yields on 10-year and 20-year JGBs, highlighting its implications for domestic investors and the broader economy. The cap allows Japanese investors to sell bonds and invest abroad, making foreign treasuries more attractive. The discussion also touches on the system's vulnerability to external shocks, referencing Mervyn King's views on economic imbalances and unpredictability.

What is the primary goal of the Bank of Japan's policy on purchasing JGBs?

• To maintain a cap on yields

• To boost domestic consumption

• To reduce government debt

• To increase inflation

What is the implication of the Bank of Japan's policy for domestic investors?

• They receive government subsidies for holding JGBs

• They face higher taxes on foreign investments

• They can sell bonds to invest abroad

• They are encouraged to hold more JGBs

Why are Japanese investors finding U.S. Treasuries more attractive?

• Due to lower risk

• Because of higher yields

• Because of currency stability

• Due to government incentives

What does Mervyn King suggest about financial crises in his book?

• They are always triggered by external factors

• They result from accumulated imbalances

• They are caused by government policies

• They are predictable

Which of the following countries is NOT mentioned as a potential source of financial imbalance?

• China

• Switzerland

• Japan

• Germany