Bank Of Japan Plunge Protection Team Goes Into Overdrive, Buys Most ETFs Since 2010

Tyler Durden's picture


While the mainstream media has become used to the daily buying of bonds by The Fed, mention that they are buying 'stocks' and suddenly one is labeled a conspiracy theory wonk - despite 1) the fact that they are, and 2) they have admitted that equity wealth creation is a policy tool. However, ignoring the almost daily vertical ramps in US stocks and volatility from a seemingly bottomless pit of margin; the Bank of Japan has been buying stocks (directly through ETFs) for years... and as the Nikkei began to turn down in early August, the WSJ reports the BoJ undertook the longest and largest consecutive buying streak since it started purchasing ETFs in December 2010.



As WSJ reports,

While the central bank is well known for its massive purchases of Japanese government bonds as a part of its monetary easing program, it also buys ETFs—albeit in much smaller quantities—that track the Nikkei Stock Average and the broader Topix index.


Through a trustee, the central bank purchased a combined ¥92.4 billion ($904.2 million) in ETFs over the first six business days of August. That's the BOJ's longest and largest consecutive buying streak since it started purchasing ETFs in December 2010.


Many traders suspect that it may not be a coincidence that the central bank is scooping up ETFs at a time when both the Nikkei and the Topix are spending considerable amounts of time in negative territory. Speculation is rife that the BOJ is following an unwritten rule, called "the 1% rule" by traders, where it buys ETFs after the Topix index falls around 1% in the morning session.




"The current 'Abenomics' experiment could come tumbling down if political support erodes, so the collusive impact of both efforts is critical to keep the ship both afloat and on course," he added.

The only problem... it is not sustainable...

But some analysts are skeptical about how effective the BOJ's ETF purchases will be in the long term.


"The BOJ can only support the bottom, but stock valuations can only be raised by the values of each company," said Takahiro Sekido, a strategist at the Bank of Tokyo-Mitsubishi UFJ. He added sharp rises in domestic shares are unlikely unless investors are able to see improvements in business conditions in the years ahead.

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Still think it's crazy talk that The Fed is actively buying stocks (selling vol) via its proxies?

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Thu, 08/14/2014 - 09:32 | 5091850 yogibear
yogibear's picture

Japan is the Federal Reserve's financial zombie. 

Just a matter of time before we see the Fed's grand printing experiment blow up.

Thu, 08/14/2014 - 09:35 | 5091868 Divided States ...
Divided States of America's picture

No wonder the clean-up at Fukushima is getting no where...Abe has ordered all financial resources to prop up the NUKKEI index....which will probably implode soon when they have no more powder left.

Thu, 08/14/2014 - 09:42 | 5091898 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

One day the BOJ will own every asset in Japan. How will that work out?

Thu, 08/14/2014 - 09:45 | 5091912 knukles
knukles's picture

Hey guys.... I got an idea.  How's about we set up a company (offshore), have no earnings, people, nothing... nada, zip, zilch, IPO it in Japan and ...  get rich.
There are buyers, kids!
BoJ will buy anything, it seems.  Janet?  Janet who?

Thu, 08/14/2014 - 10:51 | 5092206 pods
pods's picture

Glad the Central Bank of Japan has all that surplus capital to put into the markets.

I wonder if Mr. Yellen's favorite song is "I'm turning Japanese."

(yeah, that works on multiple levels, sorry for that visual)


Thu, 08/14/2014 - 10:40 | 5092141 rum_runner
rum_runner's picture

That's a great question.. The "1% rule" is amazing.  The markets are literally forbidden from going down.  One has to imagine sooner or later the other market participants are going to get a bit sketched out but... then what?  If they sell, the BoJ buys.

These truly are interesting times.*

*Chinese curse.

Thu, 08/14/2014 - 12:06 | 5092629 froze25
froze25's picture

"One day the BOJ will own every asset in Japan. How will that work out?"

I would imagine with a revolution if the people over there haven't been completely feminized yet.

Thu, 08/14/2014 - 09:34 | 5091856 Seasmoke
Seasmoke's picture

Fraud is everywhere.

Thu, 08/14/2014 - 09:38 | 5091879 saveUSsavers
saveUSsavers's picture


Thu, 08/14/2014 - 09:44 | 5091909 LawsofPhysics
LawsofPhysics's picture

And when fraud is the status quo, possession is 100% of the law.

Thu, 08/14/2014 - 09:53 | 5091947 dicksburnt
dicksburnt's picture

Fraud is profitable!!  and profits in america is job one!!

Thu, 08/14/2014 - 09:34 | 5091858 Kreditanstalt
Kreditanstalt's picture

...and these stock "purchases" will magically explode the money supply when the miniscule real market decides to SELL and those sales are converted into paper dollars...

Hmmm.   And where is the "buyer of last resort" going to come from when NFLX, Chipotle, and assorted other consumer garbage goes "no bid"?

Thu, 08/14/2014 - 10:39 | 5092133 Carpenter1
Carpenter1's picture

Double post. Deleting

Thu, 08/14/2014 - 10:38 | 5092135 Carpenter1
Carpenter1's picture

Think this is a new thing in history? Hardly. Just the method is new. Desperate regimes often try to maintain control thru manipulation of the economy, money, or financial system.


Right now, people trade with them for profit. When diminishing marginal returns sets in, people will trade against them for profit. Then it becomes them against the world. The world that now owns all the worthless paper they printed previously, well armed to play their paper game.

Thu, 08/14/2014 - 09:40 | 5091890 Dr. Engali
Dr. Engali's picture

One day we'll wake up to find that the central planners own everything, and they will have bought it all with worthless digital fiat.

Thu, 08/14/2014 - 09:45 | 5091913 LawsofPhysics
LawsofPhysics's picture

one day?  You remain the eternal optimist Doc.

Thu, 08/14/2014 - 09:47 | 5091919 knukles
knukles's picture

Seems like that's unnecessary because they already control everything, anyhow.
But appearances matter

At the feast of egos, all leave hungry

Thu, 08/14/2014 - 09:40 | 5091891 Sudden Debt
Sudden Debt's picture

Why don't they just confiscate and nationalise the stockmarket?


Today, I was amazed that Norway bought 50% of all public traded stocks on the Brussels stock exchange over the last few years.


might not sound much but remember that Brussels is important for Europe because a lot of companies worldwide have their headquarters over there.

Thu, 08/14/2014 - 09:48 | 5091923 Bioscale
Bioscale's picture

Where have you read this info?

Thu, 08/14/2014 - 10:04 | 5091994 Sudden Debt
Thu, 08/14/2014 - 10:10 | 5092023 IridiumRebel
IridiumRebel's picture

I sense a mid-afternoon ZH article.

Thu, 08/14/2014 - 10:58 | 5092228 NoDebt
NoDebt's picture

OK, so a little tough to sift through just relying on Google Translate, but I think I have the picture.

They invested ~$4B in roughly half of the companies listed on the exchange.  (Via Blackrock- it wouldn't be a good story without Blackrock being involved, obviously).

I don't think that means they own half the market cap of the entire exchange.

Thu, 08/14/2014 - 11:12 | 5092296 Cthonic
Cthonic's picture

3.4 billion euro across 57 Belgian companies, accounting for half [of the listings] of the Brussels exchange board...

Thu, 08/14/2014 - 09:48 | 5091926 NoDebt
NoDebt's picture

Wait, stop.  I need a link.  Something doesn't sound right.

Thu, 08/14/2014 - 09:43 | 5091900 manonfire666
manonfire666's picture

Newly minted vice chair from the Bank Of Israel openly bought equities as a central banker, not a huge leap. 


Thu, 08/14/2014 - 09:44 | 5091906 LawsofPhysics
LawsofPhysics's picture

"When it becomes serious, you have to lie, and buy people's retirements plans with freshly printed paper promises" - LOP (with a hat tip to Jean-Claude)

Thu, 08/14/2014 - 10:16 | 5092043 spanish inquisition
spanish inquisition's picture

I think I may be on to something (or on something)... Full employment on the way, along with putting all that printed money to use. Everyone makes origami boats out of Yen (full employment), writes a promise on each one (please let me collect my pension) and launches it into the sea (faith that it will return with interest. Maybe 5%, but not 500,000%).

Thu, 08/14/2014 - 09:48 | 5091920 USD Long
USD Long's picture

...and this is news because plunging deeply is just not a Japanese thing,

Thu, 08/14/2014 - 09:51 | 5091935 youngman
youngman's picture

It must be nice to be a player in the market where you can just print your own risk at all....what a messed up Market we have become..

Thu, 08/14/2014 - 10:02 | 5091984 101 years and c...
101 years and counting's picture

its not a messed up market we've become.  its a messed global society.  utterly pathetic the most important thing for "Western" governments is to ramp stocks to give people "faith".  it will collapse.  and it will take decades to recover.

Thu, 08/14/2014 - 09:53 | 5091944 yogibear
yogibear's picture

BOJ is remotely controlled by the US Federal Reserve.

Thu, 08/14/2014 - 09:55 | 5091953 El Vaquero
El Vaquero's picture

If stocks continue to recover from the dip and the yields on the 10 year continue to decline, that's pretty good evidence that Fed is directly intervening in equities.  It will mean that QE itself is probably being tapered, but the Fed is doing other shit.  If stocks actually crash, the Fed is actually tapering.  You'll have to wait a week or three to see what these trends bear out, but if 10 year yields are highly correlated with stocks, the Fed is not intervening, if they are not correlated, the Fed is most likely intervening. If they have a strong negative correlation, I see no other explination except central bank intervention.

Thu, 08/14/2014 - 10:29 | 5092092 madbraz
madbraz's picture

They are certainly doing something, it is no coincidence that we have reverse repos of $130 billion per day and every end of quarter it grows by $100 billion (last i checked it was something like $250 billion on June 30th), not to mention securities lending of $20 billion every day and God knows what else that they don't disclose because they don't have to...

Thu, 08/14/2014 - 10:34 | 5092115 madbraz
madbraz's picture

You put 2 and 2 together and you realize that maybe HFT and algos running the show is not a coincidence, that they didn't appear out of nowhere and regulation let them slip through the cracks.   


Aren't HFT and algos the ultimate weapon in trying to manipulate (volumeless) markets?   Isn't that something that central banks ultimately desire, as long as you replace the word manipulate with "influence"... 

Thu, 08/14/2014 - 09:59 | 5091975 yogibear
yogibear's picture

It gets real interesting once the BRICS dump the petrodollar in earnest.

Gradually the Federal Reserve is losing it's grip and right away things get expensive for Americans. With 70% of the economy being retail it's going to get noticeably tougher for people to make ends meet.

Thu, 08/14/2014 - 10:00 | 5091977 Smiley
Smiley's picture

Don't worry, as we begin to re-arm Japan the inevitable conflict with China and North Korea will keep the cogs turning a little longer.

Thu, 08/14/2014 - 10:22 | 5092074 Itchy and Scratchy
Itchy and Scratchy's picture

The end game.

Thu, 08/14/2014 - 10:23 | 5092078 Ckierst1
Ckierst1's picture


Thu, 08/14/2014 - 10:24 | 5092080 madbraz
madbraz's picture

This has nothing to do with "Abenomics", "Dudleyomics" or "Draguiomics"...this is plain simple theft, corruption, lawlessness of using the financial authority of a country to prop up the self-interests of those on the top.


It's nauseating for anyone with a conscious who is not part of that minority of the minority and that is seeing the fabric of our country and the prospects of our children go down the toilet because of these financial Hitlers, who speak as if they were kings.  


They are thiefs, nothing else.

Thu, 08/14/2014 - 10:29 | 5092091 Itchy and Scratchy
Itchy and Scratchy's picture

Well at least there's no chance of self dealing or corruption when these bankers scoop up futures.

Thu, 08/14/2014 - 10:39 | 5092142 sessinpo
sessinpo's picture

Maybe they will buy bitcon and save Bonestar. Bitcon down over 15% in the last week!

Thu, 08/14/2014 - 10:58 | 5092227 pakled
pakled's picture

More dogs eating their own doo doo....

Thu, 08/14/2014 - 11:00 | 5092239 yogibear
yogibear's picture

A dying fraudulant economic system. Same as the US.

Thu, 08/14/2014 - 11:37 | 5092455 Yen Cross
Yen Cross's picture

     Japan is about to go even MOAR full retardedER.

   GPIF Law Change Can Wait Until After Asset Review, Kihara Says - Bloomberg

Thu, 08/14/2014 - 16:50 | 5094167 lasvegaspersona
lasvegaspersona's picture

Does 'the Fed' mean the same as 'Exchange Stabilization Fund'?....thought so....

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