BIS Review 110/2006  3  The Board staff continues to devote considerable effort to modeling and forecasting velocity and money demand.
This is often explained by the fact that Japan has a current account surplus and a large portion of government bonds are held by domestic investors. It should be noted, however, that, as the European debt crisis shows, once market participants start doubting the government’s determination to work toward fiscal sustainability, the situation could change in a nonlinear fashion.