Did the bank of Japan’s purchases of exchange-traded funds affect stock prices? A synthetic control approach

ABSTRACT

This study investigates the effect of the Bank of Japan’s large-scale exchange-traded fund purchasing programme since 2013 on stock prices using a synthetic control method. We use the stock price indexes of 27 OECD countries as a control group and estimate the time-series data of the synthetic stock price index of Japan. The index in Japan increased gradually relative to the synthetic Japanese index from 2013. This result suggests that the Bank of Japan’s intervention in the stock market is distorting stock prices and should be reconsidered.

KEYWORDS:

• Bank of Japan
• exchange-traded fund
• unconventional monetary policy
• stock price index
• synthetic control

JEL CLASSIFICATION:

• E52
• E53
• G12

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ See Barbon and Gianinazzi (2019) and Charoenwong, Morck, and Wiwattanakantang (2021).

² See ‘Concepts & Classifications’ of Share Prices in OECD Statistics.

³ The results are available upon request.

⁴ In 2017, for example, the gap was more than 5 percentage points higher than the benchmark gap.

⁵ See Miyao and Okimoto (2020).

Additional information

Funding

This work was supported by the Japan Society for the Promotion of Science KAKENHI [Grant Numbers 17K03811, 19K01747, 20K01638, and 20K01757].