Heterogeneous impacts of Abenomics on the stock market: A Fund flow analysis

•We examine the heterogeneous impacts of Abenomics on the Japanese stock market using fund flow data.•Only foreign investors aggressively and immediately purchases Japanese stocks at the onset of Abenomics.•Foreign investment inflows into Japanese stocks change due to external factors originating in the United States.•A VAR analysis shows the heterogeneous impacts of Abenomics among investors inside and outside Japan.•The changes in foreign investors’ expectations are short-lived in the sense that permanent shifts cannot be identified after 2014. This study examines the heterogeneous impacts of Abenomics on the Japanese stock market using fund flow data. While Fukuda (2015) identifies changes in foreign investors’ expectations from price changes in financial markets, we focus on changes in the quantity demanded of Japanese stocks. We obtain three findings. First, only foreign investors aggressively and immediately purchased Japanese stocks at the onset of Abenomics. Second, since the two years following the launch of Abenomics, foreign investment inflows into Japanese stocks have changed due to external factors originating in the United States. Third, a VAR analysis shows the heterogeneous impacts of Abenomics among investors inside and outside Japan. However, the changes in foreign investors’ expectations are short-lived in the sense that signs of permanent shifts as a result of Abenomics cannot be identified after 2014.