Japanese Stock Prices Research Articles

Stock Prices and Exchange Rates under Monetary Policy Changes: The Cases of Japan and the US

This study examines exchange rates and stock prices in the context of US and Japanese monetary policy shifts. Also, the effects of announcements made by the monetary authorities are examined. The empirical results show that US stock prices have positive impacts on Japanese stock prices. As predicted, there is a negative correlation between Japanese interest rates and stock prices. Depreciation of the Japanese yen leads to rising stock prices. Although the Bank of Japan's announcement of “positive” news that the end of quantitative easing is expected to cause stock prices to decline, they instead increased. In the case of the US, however, appreciation of the US dollar promotes rising stock prices. This result is the opposite of the Japanese case. It may be concluded that there exists good communication between the monetary authorities and the markets, and that the news causes no unexpected effects or confusion on the financial markets.

External Event Crises on The Stock Market: Taking Japan’s Sea Discharge Incident as An Example

On August 22, 2023, the Japanese government announced that it would start discharging nuclear wastewater into the sea from August 24. This decision was widely questioned and opposed by the international community and caused strong concerns in Japan. This article aims to take the Japanese nuclear sewage discharge incident into the sea as an example to explore the impact of social crisis on Japan's domestic stock market. The main research method of this article is based on stock return analysis, using the ARIMA model to predict the Japanese stock price trend after excluding the impact of this event, and then comparing it with real data. The results of this study provide evidence that the predicted stock prices are close to the actual stock prices, indicating that as of mid-September, there was no short-term negative impact on the Japanese stock market due to the event, but from a long-term perspective, the predictions remain It is uncertain whether stock prices in Japan's financial markets will fall because of this incident. The main conclusion drawn from this study is that external events may not have a large impact on stock prices in the short term. Different from previous literature, this study uses ARIMA analysis on daily data and weekly data to obtain the relationship between them. Recommendations include organizing a team of experts; hiring a legal team; establishing a complete procedure to handle social media information, and having a dedicated public relations team may be helpful.

Geometric analysis of nonlinear dynamics in application to financial time series

A geometric method to analyze nonlinear oscillations is discussed. We consider a nonlinear oscillation modeled by a second-order ordinary differential equation without specifying the function form. By transforming the differential equation into a system of first-order ordinary differential equations, the trajectory is embedded in R3 as a curve, and thereby the time evolution of the original state can be translated into the behavior of the curve in R3, or the vector field along the curve. We analyze the vector field to investigate the dynamic properties of a nonlinear oscillation. While the function form of the model is unspecified, the vector fields and associated quantities can be estimated by a nonparametric filtering method. Estimates of vector field and its derivative will catch signals that help understanding of the dynamic properties of a state of our interest. Applying the proposed analysis to the time series of the Japanese stock price index, the vector fields and its derivative indicate that quite inefficient behaviors in a geometric sense occur from 2008 to 2009, corresponding to the years supposedly affected by the Lehman’s collapse.

Propagation graph estimation from individuals\u2019 time series of observed states

Various things propagate through the medium of individuals. Some individuals follow the others and take the states similar to their states a small number of time steps later. In this paper, we study the problem of estimating the state propagation order of individuals from the real-valued state sequences of all the individuals.We propose a method of constructing a state propagation graph from individuals’ time series of observed states. The propagation order estimated by our proposed method is demonstrated to be significantly more accurate than that by a baseline method (optimal constant delay model) for our synthetic datasets, and also to be consistent with visually recognizable propagation orders for the dataset of Japanese stock price time series and biological cell firing state sequences.

How and What Influences from COVID-19 Have Impacted Stock Prices and Exchange Rates? the Case of Japan

This study reports the empirical analyzes of the COVID-19 on stock prices and exchange rates of Japan. Newly confirmed cases and death cases have significantly positive impacts on Japanese stock prices. One reason is that Japanese stock prices recently move together with U.S. stock prices. Under this situation, the U.S. could recover from the damage of COVID-19 ahead of other countries and its stock prices have increased hugely, so the effects on Japanese stock prices have been quite large. The rising of the U.S. stock prices have had a big influence so as to deny the adverse effects by COVID-19 in Japan. The other reason is that although the stock prices of tourism, food service, and so on were damaged in Japan, other industry stock prices have been increasing. The coefficients of declaration of the state of emergency/anti-infection measures are positive which denotes that the stock market may have taken the measure favorably. However, they are positive, but they are also insignificant. For the exchange rates, the newly confirmed case is significant and positive which means that it promotes depreciation of the Japanese Yen. It seems natural because if the situation of COVID-19 becomes serious, market participants consider investment in Japan as risky. Finally, both of the cases of confirmed cases and death cases of COVID-19 are negatively and significantly related with the flow of people. The coefficient of declaration of the state of emergency/anti-infection measures is negative, however, they are not significant to the flow of people.

Have the Purchases of ETF Raised Stock Prices? Recent Japanese Case

The Japanese central bank, the Bank of Japan (BOJ) has introduced a drastic and unprecedented quantitative easing (QE) policy to combat deflation from the 2000s. The BOJ has purchased exchange-traded funds (ETF) as well as huge amounts of domestic governments bonds. This paper investigates the effect of ETF purchases by the BOJ on Japanese stock prices. Empirical results show that the purchases were conducted to prevent decreasing stock prices, however, whether the purchases directly promoted stock prices rising or not is uncertain in the short-run. On the other hand, as stock prices have been increasing since then, the purchases made situations such as preventing a decrease to stock prices and promoting prices in the long-run.

The Validity of Applying State Space Model to Japanese Stock Market

This paper examines recent Japanese stock prices using the state space model. Time series analyses like the GARCH model have often been used for estimation or prediction, but state space analyses have not been used as often. Whether or not the validity of applying the state space model to the Japanese stock market is appropriate is examined in this study. Japan was in recession for over twenty years, and a large financial crisis hit all over the world including Japan in 2008. After that, Abenomics, a huge monetary expansion from 2013, has been conducted in Japan. This paper examines the two periods from 2008–2012 and from 2013–2017 and employs the state space model to examine the Japanese stock prices. The empirical results show that the state space model fits well to examine Japanese stock prices and components of trend is larger during the period of Abenomics. From the conduction of Abenomics, stock price has mainly been moving according to the movement of the trend.

Deterministic Elements of Japanese Stock Prices under Low Interest Rates

This paper uses daily data to perform an empirical analysis of the relationship between recent Japanese stock prices and macroeconomic variables under the zero or low interest policy in Japan. The empirical results indicate that short-term interest rates have not impacted Japanese stock prices. On the other hand, long-term interest rates, exchange rates, and foreign stock prices have been significant determinants of Japanese stock prices. This seems counter to traditional economic theory, but interest rates were quite low and other variables, such as exchange rates and other stock prices, play important roles in determining Japanese stock prices.

Effectiveness of the Zero Interest Rate Policy for Financial Markets in Japan: Principal Components Analysis

The zero interest policy was introduced by the Bank of Japan (BOJ) and kept in force from February 12, 1999 through August 11, 2000, after which the BOJ introduced the quantitative easing policy in March 19, 2001. On March 9, 2006, the BOJ exited quantitative easing amid signs that deflation was ending and the recession had disappeared. After that, the zero interest rate policy again was introduced. Quantitative easing policies has been examined a lot in the literature; however, the BOJ introduced Abenomics, an unprecedented, aggressive monetary policy, on April 4, 2013. The effectiveness of the monetary policy during the zero interest rate policy era has not been adequately discussed. This article focuses on daily Japanese stock prices during the zero interest rate era; employs a principal components analysis to determine the effectiveness of the policy; and shows domestic interest rates, US interest rates, US and China stock prices, and the exchange rate of yen/US dollar influence Japanese stock prices but that the yen/Euro exchange rate does not.

Recent Comovements of the Yen-US Dollar Exchange Rate and Stock Prices in Japan

<p>This paper examines the recent relations of the yen/US dollar exchange rate and stock prices in Japan. Using bivariate Bayesian Vector Autoregressive (VAR) models, we derive several interesting findings as follows. First, 1) our analyses by Bayesian VAR models clarify that recently, the daily lags of the yen/dollar exchange rate series statistically significantly explain the evolution of the Nikkei 225, Nikkei 500, Japan Securities Dealers Association Quotation (JASDAQ), and Tokyo Stock Price Index (TOPIX) Core 30 stock index prices in Japan. Second, 2) our impulse response analyses reveal that Japanese stock prices clearly respond to the yen/dollar exchange rate changes in the recent years whilst the exchange rate changes little respond to the stock prices in Japan. As above our results demonstrate, recently, the past yen/dollar exchange rate time-series much more affect the evolution of the Japanese stock prices whilst the past Japanese stock price series little affect the yen/dollar exchange rate changes. Moreover, 3) analyzing the time-varying correlation coefficients between the yen/dollar exchange rate changes and Japanese stock returns, we also find the large increases in the contemporaneous correlations between the exchange rate and stock returns in the recent years in Japan.</p>

Exchange Rate Effects on Equity Prices: The Recent Case from Japan

This paper investigates recent effects between the yen-US dollar exchange rate and Japanese stock prices. Applying bivariate Bayesian Vector Autoregressive (VAR) models, we obtain several clear findings. First, (1) our analyses using Bayesian VAR models find that, in our recent sample period, the first lags of the yen-dollar exchange rate are statistically significant in explaining four stock index prices of the Tokyo Stock Price Index (TOPIX), Tokyo Stock Exchange (TSE) Second Section stock index, TOPIX Large 70 stock index, and TOPIX Small stock index in Japan. Second, (2) our impulse response analyses find that, in our recent sample period, the above four stock index prices clearly respond to the shock in the yen-dollar exchange rate whilst the exchange rate little responds to the shock in these stock prices. Therefore, our results suggest that, in the recent years, past yen-dollar exchange rate series much more strongly affect Japanese stock prices whilst past Japanese stock price series have little effect on the yen-dollar exchange rate movements. Moreover, (3) our analyses of the time-varying correlation coefficients between the exchange rate changes and Japanese stock returns reveal that the contemporaneous correlations between them become much higher in the recent years.

The Abe Effect and Domestic Politics

In this article, I show how Prime Minister Shinzo has promoted two major national and international economic policies-Abenomics and Japan's involvement in the Trans-Pacific Partnership- by focusing on his administration's domestic political struggles. Both agendas become significant in the face of China's regional engagement, demonstrating the inextricable ties between international affairs and domestic politics, a combination essential for grasping the Abe effect in foreign policy. KEYWORDS: Abenomics, TPP, decisionmaking process, agricultural reform in Japan.EXAMINING THE CAUSAL LINKS BETWEEN DOMESTIC POLITICS AND INTERnational trade negotiations has been a predominant research approach to understanding the dynamics of regional integration. The power of domestic politics in pushing particular interests forward to the negotiating table, while accommodating competing demands from negotiating counterparts, can be viewed as one of the key junctures in the regional integration process. Even major powers such as China and the United States inevitably confront domestic pressure at those negotiations, occasionally requiring the deregulation of rules and laws.My article illustrates how Prime Minister Shinzo and his administration have promoted two major national and international economic policies-Abenomics, his platform, and involvement in the Trans-Pacific Partnership (TPP)-by focusing on domestic political struggles that are relevant to the international negotiations. I delineate how the administration has sought to suppress opposition by the most powerful bureaucracy, the Ministry of Finance, which insisted on increasing the consumption tax to offset the Abenomics effect, and by the most influential pressure group, the Central Union of Agricultural Cooperatives (JA Zenchu). Abe's decision in December 2014 to call for a snap election in the lower house became pivotal in gaining public support for constraining the mounting influence of the tax-increase faction, represented by the Ministry of Finance, and for depriving JA Zenchu of its political power. I examine why both agendas have become significant from an international perspective, chiefly in the face of China's regional engagement- Beijing's feasibility study for a Free Trade Area of the AsiaPacific (FTAAP) and its proposal of an Asian Infrastructure Investment Bank (AIIB), which could potentially diminish Japan's sphere of influence. My article demonstrates the inextricable links between international affairs and domestic politics, a combination essential for grasping the Abe effect in foreign policy.Abenomics and the TPPAbe's main political gain from his victory in the snap election of 2014, which secured his Liberal Democratic Party (LDP)-led coalition's right to govern for another four years, is public support for the implementation of Abenomics. That support is thought to have stemmed from Abe's economic program that combines monetary easing, fiscal stimulus, and structural reform-the three arrows that says constitute the only way to overcome deflation in the Japanese economy. The election victory reassured Abe, his administration, and economic policy advisers of both the progress of Abenomics and its positive impact on economic growth. In fact, since came to power in 2012, Japanese stock prices have doubled in value, reaching ?20,000 in the Nikkei Stock Average in April 2015 for the first time over the last fifteen years. The yen has dropped by approximately one-third against the dollar since 2012, from roughly ?80 to ?120. This twopronged improvement was expected to revitalize Japan's export industries.As admitted during the election campaign, Abenomics contributed little to less export-oriented and small and mediumsized enterprises, while real wages decreased for twenty-two months on end by April 2015. Opposition parties criticized Abenomics because the weaker yen, which spurred inflation due partly to the more costly energy and fuel imports occasioned by the 2011 Fukushima disaster, did not contribute to an increase in real wages (Yomiuri Shimbun 2014). …

Towards the end of deflation in Japan?

In this paper, I investigate the Bank of Japan’s monetary policy effects under Abenomics at the initial stage. First, I describe briefly what is “Abenomics” and “New monetary policy under Abenomics” since April 2013. I also examine the causes of the sharp response of the yen and Japanese stock prices, the increase of consumer price index and the change of the public’s expectations for economic activity and prices on surveys. In the second part I explain why the new monetary policy was effective in 2013, comparing the previous policy until 2012. Although there is not so big difference between monetary policies before and after 2012 theoretically, I point out the importance of the strong commitment by central bank, the cooperation with the government and “psychological impact” on public. The third part discusses the durability of the new monetary policy. The policy effects will be sustainable if a price becomes lastingly positive, which needs a durably positive output gap. Therefore, growth strategy by Abenomics plays an important role. I also point out that the BOJ has to perform the policy over side effects such as the impact on the government bond markets, the impact on other financial market and an outflow of money to overseas.

Did the Stock Market Regime Change after the Inauguration of the New Cabinet in Japan?

This paper explored whether the Japanese stock market regime changed after the inauguration of the new Abe cabinet in Japan. Our application of Markov switching models to the Japanese stock price index returns and examinations of the price spreads in terms of the Japanese stock price indices derive the following evidence. First, (1) after the Abe cabinet started, regime of the Japanese stock markets changed. Second, (2) the regimes as to the JASDAQ Index and Tokyo Stock Exchange (TSE) Mothers Index more strongly and earlier changed than that of TOPIX. Third, (3) in our full sample period from January 4, 2011 to March 20, 2014, average positive price spreads over TOPIX were observed as to the JASDAQ, TSE Mothers, TOPIX Small, and TSE Second Section Index.

A Comprehensive Analysis of Time Series Segmentation on Japanese Stock Prices

This study comprises a comprehensive analysis of time series segmentation on the Japanese stock prices listed on the first section of the Tokyo Stock Exchange during the period from 4 January 2000 to 30 January 2012. A recursive segmentation procedure is used under the assumption of a Gaussian mixture. The number of each quintile of variance for all the segments is used as an indicator of macroeconomic situations and is investigated empirically. The results show that from June 2004 to June 2007, a large majority of stocks were stable and that from 2008 several stocks were unstable. In March 2011, the number of unstable stocks increased dramatically due to societal turmoil after the Great East Japan Earthquake. It is concluded that the number of stocks included in each quintile of volatility provides useful information about the Japanese macroeconomic situation.

Do Carry Trades in the Foreign Exchange Markets Influence Stock Prices

Carry trades have been shown to lead to significant changes in foreign exchange markets by producing shocks to interest rate differentials. This study uses fundamentals and the chartist model for the foreign exchange markets in which market participants can choose to become carry traders. It shows that carry trades play an important role in determining foreign exchange rates. Carry trades can influence exchange rates (Japanese yen and Euro against the US dollar). Also, the relationship between carry trades and three stock prices are examined empirically. As the rate of carry trades increases, stock prices in Japan and Germany rise. However, during the period of the Lehman shock, the increasing rate of carry trades may have caused a decline in Japanese stock prices, and huge amounts of money were reported to have been invested in carry trades at that time using interest rate differentials. Massive capital for carry trades seem to have been flown into foreign currencies (ex, FX) rather than stocks.

Do Japanese Stock Prices Reflect Macro Fundamentals

This paper investigates to what extent the fundamentals of the real economy are re ected in the stock prices of Japan. A Markov switching VAR model with switching variances is used to test the structural identi cation scheme. Identification of fundamental and nonfundamental shocks is shown to be supported by the data. Based on the appropriate structural restriction, the historical stock prices are decomposed into fundamental components and nonfundamental components. The decomposition shows that the linkage between Japanese stock prices and real activity shocks became strengthened since the bubble collapsed in the beginning of 1990s.

Financial Markets Forecasts Revisited: Are They Rational, Herding or Bold?

We test whether professional forecasters forecast rationally or behaviorally using a unique database, QSS Database, which is the monthly panel of forecasts on Japanese stock prices and bond yields. The estimation results show that (i) professional forecasts are behavioral, namely, significantly influenced by past forecasts, (ii) there exists a stock-bond dissonance: while forecasting behavior in the stock market seems to be herding, that in the bond market seems to be bold in the sense that their current forecasts tend to be negatively related to past forecasts, and (iii) the dissonance is due, at least partially, to the individual forecasters’ behavior that is influenced by their own past forecasts rather than others.. Even in the same country, forecasting behavior is quite different by market.

Modeling investment guarantees in Japan: A risk-neutral GARCH approach

The variable annuity market in Japan is still young, but growing rapidly. Most variable annuities in Japan are sold with one or more investment guarantees, such as a Guaranteed Minimum Maturity Benefit (GMMB), which guarantees that the ultimate annuity principal will not fall below a pre-set level regardless of the underlying investment performance. Of interest to financial institutions selling variable annuities is the cost associated with such a guarantee. Although the Black-Scholes option pricing formula can be applied readily, the resulting price might be inaccurate because returns on the Japanese stock price index do not seem to behave as assumed in the formula. In this study, we propose a method for valuing investment guarantees on the basis of a GARCH-type model, which better captures the characteristics of the stock price index. A difficulty in option-pricing with GARCH is the identification of a risk-neutral probability measure. We solve this problem by considering the conditional Esscher transform. Computational details of the proposed method are illustrated by valuing costs of two popular investment guarantees in Japan.

An empirical analysis of the volatility of the Japanese stock price index: a non-parametric approach

This paper presents an empirical analysis of stochastic features of volatility in the Japanese stock price index, or TOPIX, using high-frequency data sampled every 5 min. The process of TOPIX is modeled by a stochastic differential equation with the time-homogeneous drift and diffusion coefficients. To avoid the risk of misspecification for the volatility function, which is defined by the squared diffusion coefficient, the local polynomial model is applied to the data, and then produced the estimates of the volatility function together with their confidence intervals. The result of the estimation suggests that the volatility function shows similar patterns for one period, but drastically changes for another.