Impact of the Bank of Japan's Bond Lending Requirements Relaxation on Government Bond Supply and Demand in the Repo Market

This article presents a quantitative analysis of how the Bank of Japan's bond lending requirements relaxation measures, implemented from April 2013 to March 2025, affected government bond supply and demand in the repo market, using daily panel data by issue. The study demonstrates that these measures played a crucial role in improving repo market liquidity and maintaining smooth market functioning during the period of large-scale government bond purchases under Quantitative and Qualitative Monetary Easing (QQE). The analysis confirms that lowering minimum lending fees and raising consecutive usage limits significantly reduced GC-SC spreads, with effects becoming non-linearly larger for issues with higher Bank of Japan holding ratios.