The impact of Bank of Japan's exchange-traded fund purchases

The Bank of Japan (BOJ) enhanced its large-scale asset purchases in October 2010 by purchasing equity exchange-traded funds (ETFs). This study is the first to demonstrate that the BOJ provides downside protection for stock prices through the countercyclical purchase of ETFs. The BOJ responds to a large negative stock return during the overnight and morning periods, and submits purchase orders during lunchtime. Using the BOJ's March 2020 announcement of doubling the annual purchase amount during the COVID-19 pandemic, this study also finds that the announcement effect is small and temporary. In contrast, the flow effect of the actual purchases is significant and increases. The BOJ's countercyclical ETF purchase prevents equity risk premia from rising during an economic downturn.

© This manuscript version is made available under the CC-BY-NC-ND 4.0 license https://creativecommons.org/licenses/by-nc-nd/4.0/

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Work Title The impact of Bank of Japan's exchange-traded fund purchases
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Open Access
Creators
  1. Takahiro Hattori
  2. Jiro Yoshida
Keyword
  1. Large-scale asset purchase
  2. Quantitative easing
  3. Central banking
  4. Exchange-traded funds
  5. Unconventional monetary policy
License CC BY-NC-ND 4.0 (Attribution-NonCommercial-NoDerivatives)
Work Type Article
Publisher
  1. Journal of Financial Stability
Publication Date January 23, 2023
Publisher Identifier (DOI)
  1. https://doi.org/10.1016/j.jfs.2023.101102
Deposited February 11, 2024

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Version 1
published

  • Created
  • Added JFS-D-21-00869_R3_manuscript.pdf
  • Added Creator Takahiro Hattori
  • Added Creator Jiro Yoshida
  • Published
  • Updated Keyword, Publication Date Show Changes
    Keyword
    • Large-scale asset purchase, Quantitative easing, Central banking, Exchange-traded funds, Unconventional monetary policy
    Publication Date
    • 2023-04-01
    • 2023-01-23
  • Updated