To Lend or Not to Lend: The Bank of Japan’s ETF Purchase Program and Securities Lending

Mitsuru Katagiri (), Junnosuke Shino () and Koji Takahashi ()
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Mitsuru Katagiri: Department of Business Administration, Hosei University
Junnosuke Shino: School of International Liberal Studies, Waseda University
Koji Takahashi: Monetary and Economic Department, Bank for International Settlements

No 2304, Working Papers from Waseda University, Faculty of Political Science and Economics

Abstract: This study investigates the effects of the Bank of Japan’s (BOJ) exchange-traded fund (ETF) purchase program on stock returns, particularly focusing on the role of the stock lending market. Using firm-level panel data, we find that the BOJ’s purchases raised stock returns more for those stocks with limited availability in the stock lending market. Nonetheless, over the longer term, the BOJ’s accumulated purchases lowered lending fees and weakened the effects of their purchases on stock returns. This result suggests that ETF managers supply stocks that constitute ETFs held by the BOJ to the stock lending market, which weakens the policy effects of the program.

Keywords: Large-scale asset purchase (LSAP); ETF purchase program; stock lending market; Bank of Japan (search for similar items in EconPapers)
JEL-codes: E58 G12 G14 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2023-08
New Economics Papers: this item is included in nep-ban and nep-fmk
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Working Paper: To lend or not to lend: the Bank of Japan's ETF purchase program and securities lending (2023)
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