EFFICIENCY OF THE GOVERNMENT BOND MARKETS IN JAPAN

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In this research, I have analyzed structure of the government bonds markets, especially those of the long-term bonds in Japan, by studying the term structure of the interest rates and the Fisher hypothesis. The sample period is enlarged to include 1977 to 1993. I have tested whether the pure expectations hypothesis holds or not, and the Fisher hypothesis holds or not. I have specified that hypotheses in terms of discount bonds by using VAR (vector autoregressive) method, and estimated it by the Johansen and Juselius (1990)' cointegration approach. When I have assumed that the expected value of all of the issues have unbiasedness property, then the estimation results rejected the hypothesis about almost all terms to maturity.I estimated unobservable expected inflation rates by using the Kalman filter. The Fisher hypothesis was rejected, and my tentative tests showed that the Darby and Feldstein hypothesis was supported. They show that the interest rates change larger the the change in expected inflation rate.