The Bank of Japan as a real estate tycoon: large-scale REIT purchases

Abstract

This is the first study analyzing the Bank of Japan's purchases of real estate investment trusts (REITs) that started in 2010 as part of enhanced unconventional monetary policy. The Bank purchases REIT shares after observing a significantly negative return over the previous night and during the morning market. The Bank continues purchases daily until the overnight and morning REIT returns become positive. This counter-cyclical behavior is consistent with the objective of decreasing risk premia and stimulating spending. Our study sheds light on the unique program of a central bank's equity purchases.

Listed real estate futures trading, market efficiency, and direct real estate linkages: International evidence

“…In addition, the stabilization role of J-REIT futures, to certain extent, has also been offset by the Bank of Japan (BOJ) REITs and EFTs purchase program. The program allows the BOJ to purchase REITs during a bear market (Hattori & Yoshida, 2020; see section 4.4.3 for the extra details).…”

“…The Quantitative and Qualitative Monetary Easing (QQE) was formally introduced on 4th April 2013. This allows the Bank of Japan (BOJ) to purchase J-REITs and EFTs (Hattori and Yoshida, 2020). This naturally raises a question of whether this would offset the effect of futures trading on spot market volatility.…”

“…However, the BOJ dummy variable is negative and statistically significant, indicating that the BOJ J-REIT purchases program does have a discernible impact on the J-REIT spot market volatility. As discussed by Hattori and Yoshida (2020), the BOJ tends to purchase REIT shares in a bear market with the aim of stabilizing the J-REITs market. A significant and inverse volatility relationship between the BOJ program and REITs, therefore, is intuitive appealing.…”

Housing and Macroeconomics

“…It is beyond the scope of this article to review the literature. Interested readers should consult Bhattacharya (2022), Fu and Vaird (2022), Hattori and Yoshida (2022), Kahn et al (2022), Leung and Chen (2006), Ng et al (2022), Ogawa economics, health economics, labor economics, finance, etc. It also looks beyond the advanced economies and contributes to our understanding of emerging markets (Bryan et al, 2019;Case et al, 2005;Deng et al, 2000;Eichholtz et al, 2010;Fu and Viard, 2021;Glaeser et al, 20042019;Glaeser and Kahn, 2010;Goldstein and Moses, 1973;Huang et al, 2015;Malpezzi, 1999Malpezzi, , 2001Malpezzi, , 2018Malpezzi, , 2020McDonald and McMillen, 2010;Quigley and Van Order, 1995;Tiwari and Rao, 2022;Wu et al, 2012Wu et al, , 2016.…”