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Open Access Journal Article

Predicting Recessions and Information About Yield Curves and Stock Markets in Japan

by Hokuto Ishii a,*
a
School of Policy Studies, Chukyo University, Aichi, Japan
*
Author to whom correspondence should be addressed.
EAL  2025 4(1):75; https://doi.org/10.58567/eal04010004
Received: 14 August 2024 / Accepted: 5 February 2025 / Published Online: 13 February 2025
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Abstract

Using data from the Japanese government bonds and stock markets, this study examines the predictability of Japanese recessions based on a probit model with instrument variables. By decomposing the term spread into the expected short-term interest rate and the term premium, this study analyzes the relationship between the components of the term spread and recessions. The results show that the predictive power of the term spread for recessions has declined since 1999—when Japan began employing an unconventional monetary policy. Additionally, stock market capitalization relative to nominal GDP is a useful predictor of recessions.

Keywords: Recession forecast; Term spread; Stock market capitalization; Yield curve;
Copyright: © 2025 by Ishii. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
Cite This Paper
APA Style
Ishii, H. (2025). Predicting Recessions and Information About Yield Curves and Stock Markets in Japan. Economic Analysis Letters, 4(1), 75. doi:10.58567/eal04010004
ACS Style
Ishii, H. Predicting Recessions and Information About Yield Curves and Stock Markets in Japan. Economic Analysis Letters, 2025, 4, 75. doi:10.58567/eal04010004
AMA Style
Ishii H. Predicting Recessions and Information About Yield Curves and Stock Markets in Japan. Economic Analysis Letters; 2025, 4(1):75. doi:10.58567/eal04010004
Chicago/Turabian Style
Ishii, Hokuto 2025. "Predicting Recessions and Information About Yield Curves and Stock Markets in Japan" Economic Analysis Letters 4, no.1:75. doi:10.58567/eal04010004

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ACS Style
Ishii, H. Predicting Recessions and Information About Yield Curves and Stock Markets in Japan. Economic Analysis Letters, 2025, 4, 75. doi:10.58567/eal04010004
AMA Style
Ishii H. Predicting Recessions and Information About Yield Curves and Stock Markets in Japan. Economic Analysis Letters; 2025, 4(1):75. doi:10.58567/eal04010004
Chicago/Turabian Style
Ishii, Hokuto 2025. "Predicting Recessions and Information About Yield Curves and Stock Markets in Japan" Economic Analysis Letters 4, no.1:75. doi:10.58567/eal04010004
APA style
Ishii, H. (2025). Predicting Recessions and Information About Yield Curves and Stock Markets in Japan. Economic Analysis Letters, 4(1), 75. doi:10.58567/eal04010004

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References

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