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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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Wed, 07/09/2014 - 09:19 | 4939084 yogibear
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.

Wed, 07/09/2014 - 09:24 | 4939102 GetZeeGold
GetZeeGold's picture

 

 

It's all about free....ummm managed......markets.

Wed, 07/09/2014 - 09:25 | 4939112 Manthong
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.

Wed, 07/09/2014 - 09:31 | 4939130 kliguy38
kliguy38's picture

You're giving caca a bad name

Wed, 07/09/2014 - 09:57 | 4939195 hedgeless_horseman
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!

Wed, 07/09/2014 - 09:57 | 4939236 Manthong
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.

Wed, 07/09/2014 - 10:08 | 4939284 Pairadimes
Pairadimes's picture

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

Wed, 07/09/2014 - 10:06 | 4939278 Jumbotron
Jumbotron's picture

Japanese Kabuki-Bukkake-Circle Jerk

Yet another aging Empire from the old order collapsing.

Wed, 07/09/2014 - 09:19 | 4939086 RiskyBidness
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 go.....buy some fucking puts!!!

Wed, 07/09/2014 - 09:24 | 4939104 Dr. Engali
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.

Wed, 07/09/2014 - 09:44 | 4939190 kliguy38
kliguy38's picture

correct

Wed, 07/09/2014 - 10:59 | 4939506 Save_America1st
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, folks...it'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. 

Wed, 07/09/2014 - 09:31 | 4939129 buzzsaw99
buzzsaw99's picture

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

Wed, 07/09/2014 - 09:46 | 4939199 LawsofPhysics
LawsofPhysics's picture

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

Wed, 07/09/2014 - 09:21 | 4939091 Peter Pan
Peter Pan's picture

The Japanese are giving alchemy a bad name.

Wed, 07/09/2014 - 09:21 | 4939093 AccreditedEYE
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.

Wed, 07/09/2014 - 09:26 | 4939101 Sudden Debt
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....

Wed, 07/09/2014 - 09:24 | 4939103 youngman
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..

Wed, 07/09/2014 - 09:39 | 4939165 The man with po...
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.

Wed, 07/09/2014 - 10:10 | 4939291 Jumbotron
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.

 

Wed, 07/09/2014 - 10:17 | 4939328 Jlasoon
Jlasoon's picture

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

Wed, 07/09/2014 - 10:40 | 4939339 Dolus
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. 

Wed, 07/09/2014 - 09:26 | 4939110 taggaroonie
taggaroonie's picture

Hey presto, the state owns the means of production.

Whose idea was that?

Wed, 07/09/2014 - 10:44 | 4939441 donsluck
donsluck's picture

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

Wed, 07/09/2014 - 09:26 | 4939113 pods
pods's picture

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

pods

Wed, 07/09/2014 - 09:30 | 4939127 Dr. Engali
Dr. Engali's picture

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

Wed, 07/09/2014 - 09:35 | 4939143 LawsofPhysics
LawsofPhysics's picture

Optimist.

Wed, 07/09/2014 - 09:27 | 4939117 buzzsaw99
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.

Wed, 07/09/2014 - 09:36 | 4939148 khakuda
khakuda's picture

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

Wed, 07/09/2014 - 09:39 | 4939162 buzzsaw99
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.

Wed, 07/09/2014 - 10:11 | 4939298 Jumbotron
Jumbotron's picture

Welcome to the Company Store.

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

Wed, 07/09/2014 - 10:33 | 4939351 Jlasoon
Jlasoon's picture

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

Time to boost GDP with some Obamacare.

Wed, 07/09/2014 - 09:28 | 4939124 Dr. Engali
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.  

Wed, 07/09/2014 - 09:32 | 4939134 pods
pods's picture

This is the "Company Store" writ large.

And people will be begging for it. 

pods

Wed, 07/09/2014 - 10:11 | 4939297 NoDebt
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.

Wed, 07/09/2014 - 09:33 | 4939138 Ness.
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.

Wed, 07/09/2014 - 09:44 | 4939145 buzzsaw99
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).

Wed, 07/09/2014 - 10:24 | 4939364 Jlasoon
Jlasoon's picture

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

Wed, 07/09/2014 - 09:31 | 4939128 ...out of space
...out of space's picture

the only ammo that left for  BOJ is playing lotto.

Wed, 07/09/2014 - 09:32 | 4939133 NoWayJose
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).

Wed, 07/09/2014 - 09:34 | 4939140 LawsofPhysics
LawsofPhysics's picture

They stink of fear (as they should).

Wed, 07/09/2014 - 09:36 | 4939150 Quinvarius
Quinvarius's picture

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

Wed, 07/09/2014 - 10:21 | 4939353 pods
pods's picture

Cause ain't no such things as halfway crooks.

Wed, 07/09/2014 - 09:37 | 4939155 JenkinsLane
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%.

 

Wed, 07/09/2014 - 10:46 | 4939450 Uchtdorf
Uchtdorf's picture

There you go trying to make sense again.

Wed, 07/09/2014 - 09:40 | 4939168 all-priced-in
all-priced-in's picture

Dinosaur is now a synonym for bond vigilante.

 

 

 

 

 

 

 

Wed, 07/09/2014 - 09:43 | 4939178 eddiebe
eddiebe's picture

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

Wed, 07/09/2014 - 10:05 | 4939272 Dolus
Dolus's picture

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

Wed, 07/09/2014 - 10:27 | 4939371 Jlasoon
Jlasoon's picture

Exactly!!!! 

Wed, 07/09/2014 - 09:41 | 4939179 Quinvarius
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.

Wed, 07/09/2014 - 10:31 | 4939391 Jlasoon
Jlasoon's picture

Hashima island needs rebuilding. Maybe your horseshit company can be called "WhiteStone" and you can turn the island into an oasis retreat. 

Wed, 07/09/2014 - 09:42 | 4939181 yogibear
yogibear's picture

End result when the Central banks own everything is a planned economy like North Korea or the former Soviet Union.

Add in more and more taxes for the public union/government workers. Rather than allowing the free market to clear the waste and excesses they will remain for decades pushing down the average person's standard of living.

Wed, 07/09/2014 - 09:46 | 4939200 Quinvarius
Quinvarius's picture

All we need is one person in the right position to say "no more".  And then we get to fight over it.

Wed, 07/09/2014 - 09:44 | 4939191 astoriajoe
astoriajoe's picture

So the FSA will get?

1. healthcare

2. obamaphone

3. EBT

4. 100 shares of VFINX (vanguard sp500 index fund).

 

Wed, 07/09/2014 - 09:48 | 4939210 Chuck Knoblauch
Chuck Knoblauch's picture

Is this really news?

Corrupt governments have to float their hole ridden boats.

Diversify politically.

I like Doug Casey's new book.

Right On The Money.

Wed, 07/09/2014 - 09:50 | 4939214 SMC
SMC's picture

A policy equivalent to believing that masturbation will lead to procreation. ROFL.

Wed, 07/09/2014 - 09:54 | 4939229 all-priced-in
all-priced-in's picture

More like ass rape will lead to procreation.

 

 

 

Wed, 07/09/2014 - 09:50 | 4939217 Quinvarius
Quinvarius's picture

These asswipes should spend some money fixing Fukashima instead of giving bloated corporations a chance to do secondary offerings.

Wed, 07/09/2014 - 10:39 | 4939426 Jlasoon
Jlasoon's picture

Fixing it? They fucking destroyed it!!! This was suppose to be the grand daddy of GDP boosters.  

 

Wed, 07/09/2014 - 10:01 | 4939256 BringOnTheAsteroid
BringOnTheAsteroid's picture

Time for revolution people.

 

Oh, wait, I have pilates at 7:00pm, cancel the revolution.

Wed, 07/09/2014 - 10:32 | 4939394 Atomizer
Atomizer's picture

How will these theater decisions affect future GDP growth forecasts? 

Someone must think it's important to look stupid..

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