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Analyzing Current Risks in the Japanese Government Bond Market

The Japanese Government Bond (JGB) market rivals the US Treasury market in size. It displays a number of distinctive features that may have contributed to low yields in recent years, despite a deteriorating fiscal environment in Japan. Nevertheless, observers have argued that it is possible for JGB yields to increase significantly in coming years. In this series of stress testing papers we will help clients understand what scenarios may potentially cause JGB yields to rise, analyze the implications of these scenarios for financial markets, and assess their impact on portfolios.