Bank of Japan as a Contrarian Stock Investor: Large-Scale ETF Purchases

12 Pages Posted: 8 May 2020

See all articles by Takahiro Hattori

Takahiro Hattori

Hitotsubashi University

Jiro Yoshida

Pennsylvania State University - Smeal College of Business; The University of Tokyo - Graduate School of Economics

Date Written: April 13, 2020

Abstract

This study unveils the Bank of Japan’s behavior of purchasing exchange-traded funds (ETFs) on the Tokyo Stock Exchange. The Bank purchases ETFs after observing a significantly negative stock return over the previous night and during the morning market. The Bank stops purchasing ETFs when an overnight and morning stock return becomes positive. This unique counter-cyclical purchase behavior is consistent with its objective of decreasing equity risk premia and stimulating spending. Our study sheds light on a central bank’s program to purchase equity when the interest-rate policy is ineffective.

Keywords: large-scale asset purchases (LSAP), quantitative easing (QE), central banking, exchange-traded funds (ETF), unconventional monetary policy

JEL Classification: E52, E58, G11

Suggested Citation

Hattori, Takahiro and Yoshida, Jiro, Bank of Japan as a Contrarian Stock Investor: Large-Scale ETF Purchases (April 13, 2020). Available at SSRN: https://ssrn.com/abstract=3575835 or http://dx.doi.org/10.2139/ssrn.3575835

Takahiro Hattori

Hitotsubashi University ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8601
Japan

Jiro Yoshida (Contact Author)

Pennsylvania State University - Smeal College of Business ( email )

368 Business Building
Smeal College of Business
University Park, PA 16802
United States
814-865-0392 (Phone)
814-865-6284 (Fax)

HOME PAGE: http://www.personal.psu.edu/juy18

The University of Tokyo - Graduate School of Economics ( email )

7-3-1 Hongo
Bunkyo-ku, Tokyo 113-0033
Japan
813-5841-5653 (Phone)
813-5841-5521 (Fax)

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