The Bank of Japan’s Stock Holdings and Long-term Returns

Hibiki Ichiue
Additional contact information
Hibiki Ichiue: Faculty of Economics, Keio University

No 49, Working Papers on Central Bank Communication from University of Tokyo, Graduate School of Economics

Abstract: The Bank of Japan (BoJ) purchased equity index exchange-traded funds (ETFs), including Nikkei 225 ETFs, for over a decade and has not sold any ETFs it purchased. On March 31, 2021, the BoJ’s ETF holdings were more than 10% of the free float of the First Section of the Tokyo Stock Exchange. Primarily because the Nikkei index is price-weighted, the BoJ’s indirect holdings as a percentage of the market capitalization vary widely among individual stocks. To identify the effects of the uneven demand shocks, this paper runs instrumental-variable cross-sectional regressions of cumulative returns between September 30, 2010, a few days before the first announcement of ETF purchases, and March 31, 2021, when the BoJ terminated Nikkei 225 ETF purchases. The results suggest that the price multiplier is around 6 to 9; a 1 percentage point higher BoJ share in a stock’s market capitalization is associated with a roughly 6 to 9 percentage point higher return. The estimated multiplier is much higher than a typical estimate of 1 based on U.S. data. There is no evidence of a return reversal in the 9 months after Nikkei 225 ETF purchases ended. Various analyses, including monthly return regressions, support the analysis of cumulative returns and provide additional insights.

Keywords: Asset pricing; Unconventional monetary policy; Exchange-traded funds (search for similar items in EconPapers)
JEL-codes: E52 E58 G12 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2024-04
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fmk, nep-inv and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.centralbank.e.u-tokyo.ac.jp/wp-content/uploads/2024/04/cb-wp049.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:upd:utmpwp:049

Access Statistics for this paper

More papers in Working Papers on Central Bank Communication from University of Tokyo, Graduate School of Economics University of Tokyo 702 Faculty of Economics, The University of Tokyo, 7-3-1 Hongo, Bunkyo-ku, Tokyo, 113-0033, Japan. Contact information at EDIRC.
Bibliographic data for series maintained by Yayoi Hatano ().