Bank Of Japan Prepares To Buy Nikkei-400 ETF To Boost Stocks

Tyler Durden's picture

It is no secret that unlike other banks who, while directly intervening in the bond market only manipulate equity prices in relative secrecy (usually via HFT-transacting intermediaries such as Citadel), the Bank of Japan has historically had no problem with buying equities outright, traditionally in the form of REITs and equity-tracking ETFs. Which explains why overnight it was revealed that in order to boost the stock market, pardon, economy, the Bank of Japan is preparing to purchase exchange-traded funds based on the JPX-Nikkei Index 400 as an "option to boost the impact of unprecedented easing," according to people familiar with BOJ discussions.

Bloomberg reports that including funds that track the index would broaden the range of shares in the BOJ’s ETF purchases, and encourage companies to deploy cash for investment. That is the official storyline. It goes without saying that what the BOJ is really after is to generate further upside in the Nikkei225 which unlike other stock markets, is still notably in the red, because not only will the primary impetus behind QE - the wealth effect of the 1% - suffer, but also all those new billions in Japanese pension funds reallocated away from bonds and into stocks will continue to lose money. And the last thing the Abe cabinet, its popularity already flailing needs, is the realization that it has gambled the retirement funds of the locals on the biggest Ponzi scheme in Japanese history.

To be sure, the BOJ's ETF expansion is nothing new and had been telegraphed before. Recall from April, when we learned that Japan’s central bank will probably double purchases of exchange-traded funds in a second round of monetary easing under Governor Haruhiko Kuroda anticipated in coming months. The Bank of Japan... will increase annual ETF buys to 2 trillion yen in months ahead, according to a survey of 36 analysts. The bank could boost annual bond purchases by at least 10 trillion yen, with July most favored for a policy move.

“Kuroda doesn’t need to move as drastically as in April last year, when he was shifting the economy from deflation,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “By doubling the ETF buys, the BOJ can send a message that it’s there to take action when the economy weakens.”

In an interview on Feb. 11 last year, before becoming governor, Kuroda said that the BOJ needed to use “whatever measures are available” to eradicate deflation, adding that the bank could buy the equivalent of trillions of dollars of financial assets. Still, it has held off from seeking some additional tools such as purchases of foreign bonds, a measure advocated by former BOJ Deputy Governor Kazumasa Iwata.


Kuroda is not without his critics. Kunio Okina, a former head of the BOJ’s Institute for Monetary and Economic Studies, has raised concerns that the BOJ is financing government spending.


“The Bank of Japan is making large-scale government bond purchases that will paralyze the market, and public spending that relies on these purchases is propping up the economy,” Okina, a Kyoto University professor, said in an e-mail.


July would be a good time for the BOJ to add to its stimulus, with Prime Minister Shinzo Abe set to unveil fresh measures for his growth strategy in June, the “third arrow” of Abenomics, said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. An early move would also bolster the economy ahead of Abe’s decision on whether to raise the sales levy to 10 percent, as he grapples with the world’s biggest debt burden, Kanno said.

Of course, what is completely ignored is that while stocks are indeed suffering, the effect of importing inflation has already manifested itself, exclusively in costs of food, energy and various other imported goods and services. Where it is not manifesting itself is in the one place where it should: wages. Recall that in May, even as inflation soared to the highest in decades, real wages tumbled to the lowest point hit since Lehman.

There is, however, a catch to the BOJ's ambition to once again double down on stock purchases. As Bloomberg added, an increase in funds tracking the JPX-Nikkei 400, higher liquidity and vibrant trading in futures would be required before any decision to add the new benchmark to the bank’s ETF program. And since liquidity in the Japanese capital markets has essentially evaporated, with a handful of daily bond trades now the norm, making a mockery of "vibrant trading", Kuroda may face some troubles. Still, it is doubtful that any structural considerations will stop the BOJ from steamrolling into the stock market too, and just like it did with the JGB market, completely takeover the Japanese stock market as well, which once the ECB is on the bid in the broad market tracking ETFs, will mean that equity volumes and liquidity, already abysmal, will simply grind to a complete halt as yet another market falls under the reign of central planners.

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yogibear's picture

Japan goes from one disaster to another. It's all about demograhics for Japan and the US.

The US thinks they can import illegals and put them on welfare and they'll consume. The only problem is somone must pay their bills, it's those still working paying the welfare. Fewer these days doing productive work.

GetZeeGold's picture



It's all about free....ummm

Manthong's picture

You know your economy is really screwed when the ALL of the financial stuff is mostly valued in caca that is crapped from thin air.

kliguy38's picture

You're giving caca a bad name

hedgeless_horseman's picture



Bank Of Japan Prepares To Buy Nikkei-400 ETF To Boost Stocks

Comrade Simon Potter and Comrade Kevin Henry approve of this brilliant economic planning.  The politburo knows best what the price of stocks should be. 

Forward, Nippon Soviets!

Manthong's picture

I think they are all clueless but are trying to do whatever they can to keep their system from falling apart.

I wonder if they can keep a lid on it until the election.

Pairadimes's picture

This house of cards is now taller than the Birj-Khalifa. When it finally goes, it is going to be spectacular.

Jumbotron's picture

Japanese Kabuki-Bukkake-Circle Jerk

Yet another aging Empire from the old order collapsing.

RiskyBidness's picture

Folks......They are having a hard time keeping this dam from breaking!!  T minus 10...9..8.....oh fuck it, I gotta some fucking puts!!!

Dr. Engali's picture

You must understand that you will not be permitted to make anything substantial on the downside. Only those in the club will get that opportunity.

Save_America1st's picture

yep...that's what I've been hearing as well.  The 99.09%ers who try to make gains on the downside will be smooshed. 

Just keep freakin' stackin' that phyzz,'s still very, very, very much on sale thanks to all the bad guy manipulation.  Get it now while you still can.

Stay out of their system...stay away from their games.  You'll feel better and sleep better at night too without all their slimy corruption all over you. 

buzzsaw99's picture

Take a ride in the FAZmobile RB. Let us know how it went. :snark:

LawsofPhysics's picture

That's not how things went for The Weinmar Republic  or Zimbabwe. 

Peter Pan's picture

The Japanese are giving alchemy a bad name.

AccreditedEYE's picture

Can. Not. Fight. This shit. Go with the flow and let these global clowns, er.. bankers help you build your gold stockpile.

Sudden Debt's picture

in ETF's we trust...


it's better to buy a ETF that profits the banks than to buy the actuall stocks that pay dividends...


But that doesn't really matter when you live in a state controlled economy where they like to pretend it isn't so by buying ETF that influence the stockmarket indirectly....

youngman's picture

Its amazing how far they are going to take it....way more than I ever thought they would....I suspect trillions more too....until it all crashes..

The man with pointy horns's picture

These greedy fuckers will do anything to save face. Even if it means wasting trillions to buy a few more years or months to keep the charade going.

A sociopath will never admit defeat until well past the event.

Jumbotron's picture

Also show the ABSOLUTE COMPLETE IGNORANCE of the world's population of sheeple.

If they knew these kinds of shananigans were what's needed to keep the system afloat there would have already been a world wide panic and run on the banks.


Jlasoon's picture

I guess this would be the time to long light posts.

Dolus's picture

Exactly! We are so desentized to stimulus right now that we forget the mere mention of a goverment buying their own exchange's shares (PPT) would get you thrown out of a forum ten years ago for exspousing tin. 

taggaroonie's picture

Hey presto, the state owns the means of production.

Whose idea was that?

donsluck's picture

If you buy ETFs you own nothing. It's designed only to manipulate.

pods's picture

Duct tape and WD40 are the tools of a redneck handyman, not a central banker.


Dr. Engali's picture

the tools of a central banker are lies, obfuscation, and Ctrl-p....... oh yeah and nail guns too.

buzzsaw99's picture

this is an example of why the fed "taper" is a joke. in the end they will be buying the entire stock AND bond markets.

khakuda's picture

Yes, then the government will own all the productive assets in addition to the 50% of our paychecks they take annually.

buzzsaw99's picture

nah, the maggots own all the productive stuff. the fed and fed gub buy the worthless crap the maggots want to unload.

Jumbotron's picture

Welcome to the Company Store.

or as I like to say.....Welcome to Fascism U.S.S.A. style

Jlasoon's picture

And people thought Obamacare was about compassion. As you said welcome to Fascism 101.  

Time to boost GDP with some Obamacare.

Dr. Engali's picture

In the end the central banks will own it all, and they will have paid for it with lousy fiat that they can dilute at a whim.  

pods's picture

This is the "Company Store" writ large.

And people will be begging for it. 


NoDebt's picture

I miss the days when the HFT shops were the big baddies.

In the end, central banks will own everything, jsut as you say.  There will never be a market crash because there won't be markets any more.  Not even highly manipulated ones.  No Nikkei, no NYSE, no NASDAQ, no FTSE, no DAX, no "dark pools".... no such thing as investing at all.

Ness.'s picture

I think you're right Doc.  But I think they'll allow the mini-collapse first, blame it on those eveil wall streeter's, and then buy the whole fucking thing (for the chilrens ya know).  One day we wake up to complete CB control.

buzzsaw99's picture

they used to stop and start qe1, qe2, as the mechanism for the wall street pump and dump but now they just taper and untaper QEinfinity (along with whipsaw jawboning daily).

Jlasoon's picture

Don't forget the Belgium kickback, just more lubricant for the masses. 

...out of space's picture

the only ammo that left for  BOJ is playing lotto.

NoWayJose's picture

So it's OK for the BoJ to own real assets like stocks, but we sure don't want any of our Social Security money anywhere near the stock market (because we need all we are getting just to pay current recipients - in a Ponzi like manner).

LawsofPhysics's picture

They stink of fear (as they should).

Quinvarius's picture

Whatever he does, he should avoid the backup plan of buying gold.  Full retard means FULL RETARD.

pods's picture

Cause ain't no such things as halfway crooks.

JenkinsLane's picture

Since we're already in la-la land, instead of buying stock ETFs why doesn't the BoJ just pay

people to do nothing? That is to say, pay currently employed workers to do whatever else they

want to do with their days other than work. That way the workforce would shrink and, given that

Japan has essentially no immigration, the shortage of labor should lead to an increase in wage rates.


This may seem like nonsense but frankly, at this stage, what isn't? The BoJ would end up

spending (printing), the same amount of money it would have otherwise spent on ETFs but

by paying people to do nothing it would hopefully generate median wage inflation, rather

than transferring yet more wealth to the 1%.


Uchtdorf's picture

There you go trying to make sense again.

all-priced-in's picture

Dinosaur is now a synonym for bond vigilante.








eddiebe's picture

They could easily have their precious inflation if they would start paying working people higher wages. 

Dolus's picture

We wouldn't want people to pay off their loans to the bank with inflated currency would we. 

Quinvarius's picture

Time for me to make some horseshit company up and IPO it in Japan.  Abe will buy it.  Then I can declare BK and go live on my own island somewhere.