1 Financial market environment
2 Exchange rates
Current weakness of the yen contributing to considerable improvement in Japan’s price competitiveness
The yen’s weakness from mid-May 2020 onwards was initially driven by the return of an appetite for risk in the markets following the first coronavirus shock. The fact that the euro area experienced a stronger increase in inflation than Japan the following year further favoured the euro against the yen in that this caused market expectations of interest rate hikes in the single currency area to rise, resulting in a gradual widening of the euro area’s interest rate advantage over Japan. See Deutsche Bundesbank (2023a) and Fischer (2019). In the two goods categories energy and food, the share of imports in Japan stood at around 90% and 58% respectively in 2022. See Deutsche Bundesbank (2022a).
3 Securities markets
3.1 Bond market
Free float of government bonds in Germany and the rest of the euro area
Changes in the holder structure of government bonds in free float since the end of net purchases
Decrease in the scarcity premium
See also Deutsche Bundesbank (2023c, 2022b, 2018) for previous analyses of the holder structure and free float of Bunds. See the ECB blog of Ferrara et al. (2024) for information on the holder structure in the euro area. The SHSS capture the proprietary and customer securities holdings of all reporting account-keeping institutions in the euro area. The SHSS do not include the holdings of the ECB or the euro area national central banks; see Deutsche Bundesbank (2015). The outstanding volume of government bonds that is not recorded in the SHSS data is allocated in equal parts to free float and strategic investors. In order to avoid possible double counting in the SHSS data, the SHSS holdings for each bond are compared with the amount outstanding. If the holdings obtained from the SHSS are larger, non-euro area private investor sector holdings are adjusted downwards (see Eser et al., 2019). As an alternative to measuring free float (in relative terms) as a percentage of the total outstanding volume of bonds, free float can also be measured in absolute amounts; see Deutsche Bundesbank (2023c). These are holdings of Bunds from the Bundesbank’s monetary policy purchases. Holdings of the rest of the Eurosystem are not included here. Net purchases under the PEPP were discontinued at the end of the first quarter of 2022, while net purchases under the PSPP were discontinued at the end of the second quarter of 2022. Since March 2023, the Eurosystem has reduced its holdings under the extended asset purchase programme ( APP ), which includes the PSPP , by an average of €15 billion per month. See Deutsche Bundesbank (2024a) for information on the creditor structure in the largest euro area countries. For instance, more stringent regulatory requirements may have caused banks to more strongly reduce their market-making activities; see Haselmann et al. (2022). This comparison is based on the assumption that the Eurosystem has purchased government bonds broadly proportionally across all maturity bands and that scarcities in the ten-year segment are also reflected in the free float for all federal securities. See Deutsche Bundesbank (2023b).
Securities issuance in the German capital market in 2023
In order to fulfil its task, the Bundesbank is entitled to order and collect banking and monetary statistics from all credit institutions, investment management companies and externally managed investment companies. The Bundesbank may publish these statistics for general purposes. Up-to-date information and statistical series are available online: https://www.bundesbank.de/en/statistics/time-series-databases in particular https://www.bundesbank.de/en/statistics/money-and-capital-markets/securities-issues/ See Deutsche Bundesbank (2024b). Data from the individual securities issues statistics and balance of payments statistics are used for this. See Deutsche Bundesbank (2022c). See Deutsche Bundesbank (2023d). See Deutsche Bundesbank (2024c). See supplementary information entitled “ Free float of government bonds in Germany and the rest of the euro area ”.
3.2 Equity market
4 List of references
For the implications of the current yen weakness, especially for Japan’s price competitiveness, see the supplementary information entitled “ Current weakness of the yen contributing to massive improvement in Japan’s price competitiveness ”. Real interest rate measured as the difference between € STR swap rate and the rate for concurrent inflation swaps. Real interest rates derived from swaps are less distorted by liquidity premia than returns on inflation-indexed bonds; see Deutsche Bundesbank (2023b). See supplementary information entitled “ Free float of government bonds in Germany and the rest of the euro area ”. While short-term futures prices for oil have risen since the beginning of the year, those for gas have fallen. Taken together in the energy component, these opposing price developments partially offset each other. See the supplementary information entitled “ Securities issuance in the German capital market in 2023 ”.