Yield curve of Treasury Bills in Japan under different regimes of non-traditional monetary policy

When the BOJ (Bank of Japan) adopted a "quantitative and qualitative easing policy," zero bound restriction existed. The notion of market practitioners that the BOJ would not adopt a "negative interest rate policy" caused less volatility in the TB (Treasury Bill) market in comparison with a regime of a "negative interest rate policy." After the BOJ decided to adopt a "negative interest rate policy," zero bound restriction was lifted, and market practitioners expected that the policy rate decided by the BOJ might be lowered. This expectation gave room for TB yields to fluctuate more than before, and caused more volatility in the TB market under the regime of a "negative interest rate policy" than under one of a "quantitative and qualitative easing policy." This is why the TB yield curve under a "negative interest rate policy" is driven by a single common trend with mutual causalities in all maturities. In other words, the normal transmission function of the TB yield curve is recovered by the introduction of a "negative interest rate policy."