Even a resurgent yen hasn't dampened Japan's stock rally over the past couple months, but that's not necessarily because investors like the market.
The Nikkei 225 index has surged around 10 percent since late June, even as the yen has climbed against the dollar, with the pair testing levels under 100.
Normally this would be bad news for stocks as a stronger yen is a negative for exporters as it reduces their overseas profits when converted to local currency. So what explains the buoyant stock market?
Analysts attributed the gains to the Bank of Japan (BOJ), not fundamentals.
In a report titled, "BOJ nationalizing the stock market," Nicholas Smith, an analyst at CLSA, said that the central bank's exchange-traded fund (ETF) buying program was distorting the market.
At its late July meeting, the BOJ said it would increase its ETF purchases so that their amount outstanding will rise at an annual pace of 6 trillion yen ($56.7 billion), from 3.3 trillion yen previously.
Those purchases were particularly distorting to the market because they focused largely on funds tracking the Nikkei 225 index, Smith said in a note dated Sunday, estimating that more than half of the BOJ's ETF buying was likely in Nikkei-tied funds.
That was particularly distorting because that gauge was "a Flintstones index from an abacus age," due to its arbitrary inclusions.
For example, he noted that Uniqlo owner Fast Retailing had the largest weighting in the index, but that was primarily due to its high share price after avoiding any stock splits since April 2002. He estimated that BOJ buying of Nikkei-tied ETFs worked out to more than 16 percent of the stock's free float each year.
By comparison, Toyota Motor had the biggest market capitalization of any Japan stock, but was only ranked 15th by weight in the Nikkei index, he noted.
"If it seems strange that the BOJ is hamstringing the price discovery mechanism of the Japanese stock market by partially nationalizing it, it is all the stranger that it chooses to do so by substantially skewing its buying towards such a distorting index," he said. "The arbitrary decisions of the Nikkei committee get to choose the destination of trillions of yen of BOJ – and hence government - money."