Bank of Japan Equity Purchases: The Final Frontier in Extreme Quantitative Easing

57 Pages Posted: 27 Jan 2019 Last revised: 1 Apr 2020

See all articles by Ben Charoenwong

Ben Charoenwong

National University of Singapore - Department of Finance

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Asian Bureau of Finance and Economic Research

Yupana Wiwattanakantang

National University of Singapore - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: March 30, 2020

Abstract

Between 2011 and March 2018, the Bank of Japan (BOJ) purchased equity worth approximately 4% of Japan’s GDP. We find the stock return elasticity with respect to BOJ purchases is around 1.6 on the day of the purchase. Over one quarter, purchases worth 1% of total assets correspond to a one-percentage-point increase in returns and a 0.27-percentage-point increase in total assets. BOJ purchases also predict equity but not debt issuances. However, the increases in total assets largely reflect increased cash and short-term investments. This unconventional monetary stimulus thus does not appear to transmit into tangible capital investment.

Keywords: Unconventional Monetary Policy, Quantitative Easing, Corporate Valuations, Corporate Investment, Japan

JEL Classification: E52, E58, G31, G32

Suggested Citation

Charoenwong, Ben and Morck, Randall K. and Wiwattanakantang, Yupana, Bank of Japan Equity Purchases: The Final Frontier in Extreme Quantitative Easing (March 30, 2020). University of Alberta School of Business Research Paper No. 2019-501, Available at SSRN: https://ssrn.com/abstract=3310561 or http://dx.doi.org/10.2139/ssrn.3310561

Ben Charoenwong (Contact Author)

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Randall K. Morck

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Yupana Wiwattanakantang

National University of Singapore - Department of Finance ( email )

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