REFORM OF THE GOVERNMENT BOND MARKETS IN JAPAN

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In this research, I have analyzed structure of the government bonds markets by studying the semi-strong-form of the efficient market hypothesis. The sample periods are from 1996 to 1998 and 1996-2002.I have tested whether the hypothesis about the spot market and futures market holds using five minites inteval tick data and daily data.Also, I used the affine-yield model, actual and implied volatility data estimated from option price data. Then using GARCH framework too, I got the result that the market efficiency hypothesis did not hold for this market.From estimation result shows that, in the government bonds markets, information is not efficiently processed. In Japan, public sectors like central government especially the MOF and the BOJ have a grate deal of that bonds and the private sector cannot behave according to market mechanism.In this study, I have studied reform of this market and new policyies by introducing individual traders here to make this market more efficient.