The Bank of Japan has had a lot less impact on the Japanese stock market than some have assumed in recent years, and the effectiveness of its purchases in reflating the economy may be limited, according to analysis by Societe Generale.
While the BOJ held about three-quarters of the assets of Japanese exchange-traded funds as of earlier this year, that still amounted to just 3 percent of the stock market's capitalization, according to Societe Generale estimates. In secondary trading, they assessed that pricing showed the purchases weren't making the market less liquid.
"The conclusion we are making is that the liquidity of the market is not really impacted," said Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong, who was part of a team that analyzed the ETF purchases in an April report. "I don't think there has been any real distortion in market prices," he also said.