Impact of the Bank of Japan’s Purchase Program on the Japanese REIT Market

Abstract

In 2010, the Bank of Japan (BOJ) began directly purchasing Japanese real estate investment trusts (J-REITs). We divide J-REITs into the BOJ’s J-REIT and non-J-REIT purchases based on the BOJ’s “Principal Terms and Conditions for Purchases of ETFs and J-REITs.” We investigate the impact of the BOJ’s purchase program on the J-REIT market. Based on our estimation of the difference-in-differences (DID) model using monthly returns, we find no significant policy impact. Moreover, in the Fama–MacBeth regression on monthly returns, our analysis reveals that J-REIT returns and BOJ ownership have no significant positive relationship. The empirical results of the DID analysis reveal that the daily returns in the BOJ’s purchased J-REIT group were significantly better than those in the control group after the implementation of the BOJ’s J-REIT purchase program. Although we find a clear short-term positive impact from the BOJ’s intervention, this impact declines over time and the long-term impact is limited.