LAUSR

Abstract This article models, from a Keynesian perspective, the dynamics of Japanese government bond (JGB) nominal yields using daily data. Models of government bond yields based on daily data, such as those presented in this article, are useful not only to investors and market analysts, but also to policymakers for assessing financial conditions and macroeconomic developments in real time. The article models long-term JGB nominal yields based on the short-term interest rate on Treasury bills, the equity index, the exchange rate, and the commodity price index. The findings reinforce Keynes’s claim that the central bank influences the long-term government bond yield through its control of the short-term interest rate and various monetary policy actions. The results show that Keynes’s claim has held for JGBs in the past two decades.