Who carried more credibility?: An analysis of the market responses to news from the Japanese government, the Japanese central bank and international credit rating agencies

The Japanese economy has been in recession since its real estate crisis back in the 1990s. Since the burst of the bubble, the Japanese central bank has implemented unconventional monetary policy in an attempt to stimulate the economy. However, the effect appears to be rather limited. It has, however, provided an opportunity to investigate the extent to which markets are influenced by news made by the Japanese government, the Japanese central bank (BoJ) and international credit rating agencies. The aim of this research, therefore, is to examine the market reactions to good and bad news announced by these institutions and to compare who carried more credibility. The findings show that the market had asymmetric responses to good versus bad news. In addition, news from national governments, the national central bank, as well as major international credit rating agencies, had distinct impacts on the market. Moreover, results confirm the role of the introduction of Abenomics as a watershed development in the Japanese economy. Good news made by the major international credit rating agencies had the greatest credibility before the introduction of Abenomics, while good news made by the BoJ had the greatest credibility afterward.