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The Bank of Japan's Exchange Traded Funds purchase and its effects on Nikkei 225 stocks

Crawford School of Public Policy

Event details

Public Seminar

Date & time

Wednesday 09 May 2018
11.00am–12.00pm

Venue

Seminar Room 1, Crawford School of Public Policy, Building 132, Lennox Crossing, ANU

Speaker

Kimie Harada, Visiting Fellow, Crawford School of Public Policy.

Contacts

Thomas Home

After extensive experience in Japanese government committees and research into financial systems and services, Kimie Harada will present her findings on the impacts of the Exchange Traded Funds (ETFs) purchasing program.

ETFs is an initiative of the Bank of Japan (BOJ) since December 2010. The BOJ’s ETFs purchasing program was favouring stocks on the price-weighted Nikkei 225 over the TOPIX under the previous program. Total net asset value of the ETFs market was 32.5 trillion yen as of the end of March 2018. Since maturity or redemption does not come to ETFs, credit risks and price fluctuation risks are relatively high. As a consequence, the BOJ faces more risks by holding ETFs. The bank is apt to place a purchasing order in the afternoon when the market is likely to be in a downturn. The influence on underlying stocks is assessed by comparing performance of stocks between those included in the Nikkei 225 and others based on Difference-in-Difference analysis with separating morning and afternoon returns.

Harada finds that the Nikkei 225 stock afternoon returns are significantly higher than those of non-Nikkei 225 stocks when the BOJ purchased ETFs. The results indicate that cumulative average effects on the Nikkei 225 are more than 10 per cent.

Kimie Harada is a Visiting Fellow at Crawford School of Public Policy and a Professor at Chuo University. You can find her full profile here

A light lunch will be provided.

The AJRC Seminar Series is a forum for researchers to engage on issues relevant to Japan. Topics include, but are not limited to, economics, international relations, politics, and national security. Seminars are typically very frank and early stage studies are most welcome.

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