TY - JOUR
T1 - The impact of Bank of Japan's exchange-traded fund purchases
AU - Hattori, Takahiro
AU - Yoshida, Jiro
N1 - Funding Information:
We thank Calvin Schnure, Brent Ambrose, Eva Steiner, Sean Wilkoff, and the seminar participants at Penn State, Bank of Japan, and ASSA. We also thank Iftekhar Hasan (Editor) and two anonymous referees for their insightful suggestions. This study is financially supported by Japan Society for the Promotion of Science (JSPS) KAKENHI Grant-in-Aid (21K13321).
Funding Information:
We thank Calvin Schnure, Brent Ambrose, Eva Steiner, Sean Wilkoff, and the seminar participants at Penn State, Bank of Japan, and ASSA. We also thank Iftekhar Hasan (Editor) and two anonymous referees for their insightful suggestions. This study is financially supported by Japan Society for the Promotion of Science (JSPS) KAKENHI Grant-in-Aid ( 21K13321 ).
Publisher Copyright:
© 2023 Elsevier B.V.
PY - 2023/4
Y1 - 2023/4
N2 - 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.
AB - 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.
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U2 - 10.1016/j.jfs.2023.101102
DO - 10.1016/j.jfs.2023.101102
M3 - Article
AN - SCOPUS:85146557141
SN - 1572-3089
VL - 65
JO - Journal of Financial Stability
JF - Journal of Financial Stability
M1 - 101102
ER -