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  • Fiscal policy, exchange rates

Click to read the article below and then answer the questions:

Japanese investors buy UK government bonds at record rate in early 2021

  • Explain why the UK government issues bonds.

  • What proportion of UK bonds are held by overseas investors?

  • The chart illustrates that Japanese investors have been buying UK government bonds at a record clip. Using a diagram, analyse the effects of this buying spree on the UK bond market.

  • Hideki Kishida refers to currency risk. Explain why a volatile £:¥ exchange rate would deter Japanese investors from purchasing UK assets.

Gavin Clarke, Emmanuel College

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