Not sure why the images aren't posting. Perhaps try the link. The fact that the BoJ now controls 75% of Japanese ETFs shows at what length central banks have essentially cornered this "market". therealheisenberg / 13 hours ago A couple of weeks ago in “Revisiting The Tokyo Whale,” we took a few minutes to remind readers just how large the Bank of Japan’s footprint in the Japanese ETF market truly is. We thought it was important to keep the story front and center lest it should get lost in the incessant chatter about Fed balance sheet normalization and speculation about more hawkish forward guidance from the ECB. Specifically, we showed you the following chart from SocGen: Kuroda, SocGen estimated, had amassed a ¥15.7tn ($144bn) ETF portfolio. That would mean the BoJ owns roughly 75% of the total assets in Japanese equity ETFs. Implicit in that assessment is the notion that the bank is a major shareholder in some Japanese corporates. Here’s a list (again from SocGen) that shows the largest BoJ holdings at the individual company level and what % of each stock’s total market cap Kuroda controls: Well, if you read the post linked above the following shouldn’t come as a surprise, but we wanted to highlight it anyway because again, there are a lot of people talking about central banks taking their foot off the proverbial pedal. As you’ll read below, the BoJ is still mashing on the gas… Via Nikkei The Bank of Japan has stepped up purchases of exchange-traded funds as part of its monetary easing policy, with the balance surging to 15.93 trillion yen ($144 billion) as of March 31. The total marks an 80% rise from a year earlier and more than a sevenfold increase since the central bank kicked off its quantitative and qualitative easing — adding riskier assets to its balance sheet — in April 2013. ETF purchases have gradually increased under the unconventional policy, expanding to 6 trillion yen a year in July 2016 from 3.3 trillion yen. Now before you read the next part of the Nikkei piece, do recall what SocGen said about the timing of these purchases. To wit: Overall, from January 2011 to end-March 2017, 85% of ETF purchases declared by the BoJ occurred on a day where the TOPIX index registered a negative return (99% when the daily return was below +1%). There were only two occasions when the BoJ made purchases of Nikkei & TOPIX ETFs when the TOPIX closed above +1%. Now back to Nikkei: The bank apparently buys frequently on days when the stock market dips in the morning, serving to stabilize share prices. “The BOJ’s ETF purchases help provide resistance to selling pressure against Japanese stocks,” says Rieko Otsuka of the Mizuho Research Institute. Should the current pace of buying continue, the BOJ’s ETF holdings would reach about 30 trillion yen in about two years. The market capitalization of the Tokyo Stock Exchange’s first-section companies comes to 550 trillion yen. The bank’s growing market presence has raised concerns about the repercussions when the easing policy eventually winds down. When speculation of a BOJ exit grows, the anticipated cutbacks on ETF purchases would accelerate selling of Japanese stocks. As a precaution against a sharp market decline, “the BOJ many need to set aside provisions,” Otsuka says.
No issue at all, Martin. Central banks should completely corner the market and buy up all shares of all companies by printing money out of thin air.
Well, thing is, if you actually read the earlier post mentioned in the article, the author does point out that the BoJ holds a relatively small amt as a percentage of the mkt (Nikkei 225 is the index with the highest share of BoJ ownership at 3.2%; with TOPIX at arnd 2%). So it's not like the BoJ is actually "buying up all shares of all companies by printing money out of thin air". It's just that there seems to be an issue with how much of the mkt is actually available packaged up into ETF format.
Actually, the thing is the central bank - whose job is to ensure price stability (and in the case of the US - magically assist in lowering unemployment) is actually buying ETFs/stocks in the market place at all. If you want a story of central banks printing money to buy actual shares, look no further than the SNB.
Yes, I am familiar with all these stories... What do you suggest the SNB should do with the FX reserves they accumulate?
And we wonder why global stock markets keep marching higher and higher, even after poor economic data, highly volatile geopolitical events, and terrorist attacks?
Curious, here. Are you saying there is no truth to any of it? So if I am a central bank, and can print as much money as I want and use it to buy up direct shares of a foreign company until I was the majority shareholder, and then put board members and exert influence on that company to do whatever it is I wanted, you don't see any issue at all in this? Take away the aspect of market manipulation in any regard. Lets suppose I influence a defense contractor. You think this is just peachy, right?
The sheer fact that Japanese taxpayers (those ultimately responsible for BoJ debt) have a SINGLE YEN being spent by the BoJ to buy publicly-traded corporation stock is an utter disgrace. If I am Japanese, why should my tax dollars be spent on propping up the value of Sony Corp.'s CEO's stock holdings?