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Bank Of Japan Buys A Record Amount Of Equities In August

Tyler Durden's picture




 

Having totally killed the Japanese government bond market, Shinzo Abe has - unlike the much less transparent Federal Reserve, who allegedly use their proxy Citadel - gone full tilt into buying Japanese stocks (via ETFs). In May, we noted the BoJ's aggressive buying as the Nikkei dropped, and in June we pointed out the BoJ's plan tobuy Nikkei-400 ETFs and so, as Nikkei news reports, it is hardly surprising that the Bank of Japan bought a record JPY 123.6 billion worth of ETFs in August. The market 'knows' that the BoJ tends to buy JPY10-20 billion ETFs when stock prices fall in the morning. The BoJ now holds 1.5% of the entire Japanese equity market cap (or roughly JPY 480 trillion worth) and is set to surpass Nippon Life as the largest individual holder of Japanese stocks. And, since even record BoJ buying was not enough to do the job, Abe has now placed GPIF reform (i.e. legislating that Japan's pension fund buys stocks in much greater size) as a primary goal for his administration. The farce is almost complete as the Japanese ponzi teeters on the brink.

 

Via Nikkei Asia,

The Bank of Japan is growing into its role as a key source of support for the country's stock market, as it has stepped up purchases of exchange-traded funds to bring its equities portfolio to an estimated 7 trillion yen ($63.6 billion) or so.

 

The central bank bought 123.6 billion yen worth of ETFs in August, the largest monthly tally so far this year. At one point, it snapped up ETFs in six straight sessions amid weak stock prices.

 

The BOJ tends to make 10 billion yen to 20 billion yen worth of purchases when stock prices fall in the morning. The bank has not made any purchases so far in September because the market has been rallying.

 

According to BOJ data, the market value of individual stocks and ETFs that it held as of March 31 came to 6.15 trillion yen. Given its purchases since then and the market rally, the value is estimated to have increased to a whopping 7 trillion yen or so by now.

 

That figure accounts for 1.5% of the entire market value of all Japanese shares, or roughly 480 trillion yen. It also means the BOJ may surpass Nippon Life Insurance, the largest private-sector stock holder with some 7 trillion yen in holdings, as early as this year and emerge as the second-biggest shareholder behind the Government Pension Investment Fund -- the national pension fund with 21 trillion yen.

 

The BOJ started outright purchases of shareholdings from banks back in 2002 with the aim of stabilizing the country's financial system. To prevent stocks from tumbling steeply, it also began buying ETFs in 2010. The bank does not buy individual shares now, but it doubled its annual ETF purchases to 1 trillion yen when it introduced unprecedented levels of monetary easing in April 2013.

 

It is unusual for a central bank to buy stocks and ETFs, given that their sharp price swings pose the risk of undermining the health of the bank's assets. High levels of purchases by the BOJ affect stock prices and may hurt asset allocation and development of the financial markets.

 

The timing and technique of selling the BOJ's shareholdings are also a tricky question. A freeze has been put on sales of individual shares until March 2016, and there is no selling schedule for ETFs. But given that the bank's holdings are equal to roughly half the 15 trillion yen in net buying by foreigners last year, large-scale selling would be certain to shake the market.

*  *  *

We hope, by now, it is clear what a fraud the entire system has become. Simply put, the BoJ has the firepower (unlimited printing) but not the liquidity (the markets are just not deep enough as was clear in the JGB complex) to keep the dream alive if (and when) investors lose faith in Abenomics. Clearly that's why Abe needs to get the GPIF on the case...

 

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Wed, 09/24/2014 - 14:10 | 5252649 cheeseburger901
cheeseburger901's picture

Mass Fraud should be a crime against humanity.

 

Please support this petition at whitehouse.gov.

 

https://petitions.whitehouse.gov/petition/mass-financial-fraud-should-be...

 

The petition needs 150 signatures to go "live" to the public. 

 

Wed, 09/24/2014 - 14:24 | 5252713 max2205
max2205's picture

At least they admit it unlike Mr Yellen

Wed, 09/24/2014 - 14:28 | 5252736 kliguy38
kliguy38's picture

must have been a "bargain"

Wed, 09/24/2014 - 14:36 | 5252765 Divided States ...
Divided States of America's picture

We better hope that this 'Japanese equity orgy experiment' bukkakes all over their faces or else we will for sure have it occur in the US Stock markets as well in the future.

Wed, 09/24/2014 - 14:48 | 5252798 Al Huxley
Al Huxley's picture

Speaking of Mr Yellen, I wonder what the profit-to-equity ratio is for the Japanese market.   Maybe he should be buying over there...

Wed, 09/24/2014 - 14:31 | 5252744 stocktivity
stocktivity's picture

It's all Bullshit!!!

Wed, 09/24/2014 - 16:03 | 5253116 thunderchief
thunderchief's picture

I I think Japan is so screwed up that now there best bet is to apply for USA statehood and become the 51st state.

I think it would be good, as they could then really take over Hawaii and even try to kick the Chinese out of New York and San Francisco.

It would probably have little effect on Japan "proper" too.

Wed, 09/24/2014 - 14:11 | 5252654 Dr. Richard Head
Dr. Richard Head's picture

So if the BoJ has been able to do this for 20 years or so and the end is just nearing does that mean Amerika has another 15 plus years of QE shananigans? I sure as hell hope not.

Wed, 09/24/2014 - 14:29 | 5252688 Dr. Engali
Dr. Engali's picture

At first I didn't think that was possible for this to continue since Japan's debt is largely supported by the carry trade. But now I see that Europe's bonds are trading below ours and it makes me believe that a new carry trade is being or  will be established with German bunds used as the support. Beyond just the difference in yield a strong dollar and a weak Euro would make this a profitable play. This could go on for a hell of a lot lot longer than any of us bargained for.

Wed, 09/24/2014 - 14:33 | 5252755 viahj
viahj's picture

Japan had Americans going into debt to buy cars and tvs for those 20 years.  what do we have going for us?

Wed, 09/24/2014 - 14:44 | 5252787 RattNRoll
RattNRoll's picture

Let's see..............We have tatted up fat women, dumbed down school chirren, obama/ebolacare, hollywood, a shrinking middle class, gm, and justin beiber.

Wed, 09/24/2014 - 14:53 | 5252826 Grande Tetons
Grande Tetons's picture

Bieber is Canadian, but I am sure you can find another useless twat to replace him on your list. 

Wed, 09/24/2014 - 15:13 | 5252882 tdogg
tdogg's picture

Justin Timberlake / Briteny Spears.

Useless twat list - unfortunately it's not very hard.

 

I disagree with a "hell of a long time" theory.

A lot has changed since 1990.  Mainly, debt / wages / money velocity / CONfidence.

This shithouse doesn't make it past 2015

Wed, 09/24/2014 - 19:44 | 5253900 Bogdog
Bogdog's picture

At least we'd all be able to get better sushi. Of cours we'll be standing in bread lines by then though. So maybe not.

Wed, 09/24/2014 - 14:11 | 5252657 LawsofPhysics
LawsofPhysics's picture

And somehow Goldman Sachs and JPM knew all along...

See the post above for the only viable solution...

Wed, 09/24/2014 - 14:13 | 5252659 RattNRoll
RattNRoll's picture

QE forever until ww3.

Wed, 09/24/2014 - 14:14 | 5252660 JustObserving
JustObserving's picture

Waiting for the Fed to announce that it has been secretly buying US equities to support the economy.  Probably won't happen in this lifetime.

Wed, 09/24/2014 - 14:34 | 5252757 Market Rage
Market Rage's picture

They don't need to announce it.  It may be indirect, but that's what they've been doing all along.

Wed, 09/24/2014 - 14:20 | 5252684 Yen Cross
Yen Cross's picture

    At what point does the rest of the world start pricing more risk into Japanese investment abroad? If a group of Japanese investors comes to me with a stack of yen and wanted to invest in my company, what guarantee do I have that they are going to be able to meet their long term commitments?

    What about Japanese importers that work for and with other global import suppliers? WTF protections do they have if the yen blows up?

Fuck off you junkster! Japan is done,doomed, fucked sideways. Nada ,Nilch, deep fat fried!

Wed, 09/24/2014 - 14:21 | 5252702 JailBank
JailBank's picture

About the time China parks a destroyer in a Japanese port.

Wed, 09/24/2014 - 14:25 | 5252721 Yen Cross
Yen Cross's picture

 That would be a Godsend as it would hasten Japans demise before it can inflict any more damage on global markets and it's own people that have lost almost 1/2 of their purchasing power in a little over (2) years.

   Japan will NEVER recover from the debt load it's carrying. NEVER. The only way back for Japan is a reset.

Wed, 09/24/2014 - 14:18 | 5252686 delivered
delivered's picture

I would love to query the world's top economist ten to twenty years ago and get their perspective on today's current CB policies. ZIRP in the US supported by direct monetization of US debt and a balance sheet expanding from $1 trillion to $4 trillion in less than a decade (not to mention bailing out TBTF). The BOJ being really the only party in the Japanese bond market and actually directly buying equities on the open market. The ECB having to actually use a negative interest rate policy and basically using QE through its proxy banks to buy up soverign debt throughout the region. The PBoC bailing out failed credit markets time and time again to keep their remarkable growth story of 7.5% GDP (plus or minus .1%) in tact. 

If you asked the world's top economist even ten years ago about these strategies, most if not all would have stated that the system was failing and these extreme measures would be dissasterous. Twenty years ago, these policies would basically be unthinkable. But today, it's just the new normal as one CB simply upstages the other. I guess is it just all a matter of perspective and just like the top 9th inning closers in baseball, it really pays to have a very, very short memory. 

Wed, 09/24/2014 - 14:21 | 5252704 Burticus
Burticus's picture

Sounds like a great deal.  Create "money" out of thin air, then use it to acquire shares in companies and (foreclosed) real estate.  Endgame is the same as in the board game Monopoly.

Well, maybe it's not such a great deal for the 99.99% who can't create money out of thin air.

Wed, 09/24/2014 - 14:25 | 5252714 jubber
jubber's picture

"It is unusual for a Central Bank to buy Stocks and ETF'S"

I would suggest that it is patently obvious from the moves in Europe this morning and the US this afternoon that both the ECB and the Fed are also doing this, the moves in Europe this morning and the middle of the US night were huge.

Wed, 09/24/2014 - 14:32 | 5252747 NDXTrader
NDXTrader's picture

Certainly. The morning Hank Paulson crapped his drawers in front of a room full of Congresscritters changed the entire ballgame. It showed those who would do it how far people are willing to go when they are scared.  

Wed, 09/24/2014 - 14:26 | 5252723 Bell's 2 hearted
Bell's 2 hearted's picture

ANOTHER country exporting deflation to amerika

 

 

 

learn it 

 

love it

Wed, 09/24/2014 - 14:31 | 5252741 orangegeek
orangegeek's picture

whatever it takes to get re-elected

Wed, 09/24/2014 - 14:32 | 5252746 firstdivision
firstdivision's picture

Holy WTI! Did a massive storage facility blow up?

Wed, 09/24/2014 - 14:34 | 5252750 Dr. Engali
Dr. Engali's picture

Once again the shorts fall prey to the fed's BS.

Wed, 09/24/2014 - 15:52 | 5253068 asteroids
asteroids's picture

Put EWV and JPNS on your shopping list when things implode.

Wed, 09/24/2014 - 14:34 | 5252754 Al Huxley
Al Huxley's picture

They should set up a secondary shadow entity, and then they could buy and sell from themselves, and bid the market up as high as they felt necessary.

Wed, 09/24/2014 - 14:51 | 5252813 Racer
Racer's picture

Er, HFTs do that already?

Wed, 09/24/2014 - 14:36 | 5252764 NDXTrader
NDXTrader's picture

China really joining the QE party should get us to the 2200 SuperCycle goal

Wed, 09/24/2014 - 14:38 | 5252771 CHX
CHX's picture

<<< Japan

<<< Paper gold

 

Which Ponzi will fail first, or is it all gonna blow at the same time (quite likely IMHO) ?

Wed, 09/24/2014 - 14:39 | 5252780 buzzsaw99
buzzsaw99's picture

man there are some funny quotes in that one:

It is unusual for a central bank to buy stocks and ETFs, given that their sharp price swings pose the risk of undermining the health of the bank's assets...

Freaking hilarious. How does it pose a risk when the BOJ sets the price and can buy the entire market?

The timing and technique of selling the BOJ's shareholdings...

omg lolololololololol!!!!!!!!!!!!

Wed, 09/24/2014 - 14:42 | 5252781 CHX
CHX's picture

If/when Japan blows, it will rock the world. Japan has a few TBTFs, so that will be a major "holy ©rap" moment (~ Lehmann^1000).

Wed, 09/24/2014 - 17:30 | 5253434 S.N.A.F.U.
S.N.A.F.U.'s picture

I'm kind of expecting "I've abandoned free market principles to save the free market system" to be taken to a whole new level at that point.

Wed, 09/24/2014 - 14:50 | 5252808 Racer
Racer's picture

Bank of Japan buys ETFs and corporations borrow money to buy their own company's shares from the company executives. Talk about fraud and pyramid schemes gone mad!

Wed, 09/24/2014 - 14:54 | 5252822 forwardho
forwardho's picture

This causes an image to form...

Of a Guy holding a huge 16 ton block above his head.

He sure as shit don't want to stand there but he's screwed if He lets go the rope.

Wed, 09/24/2014 - 16:06 | 5253126 Pareto
Pareto's picture

+1 Excellent analogy

Wed, 09/24/2014 - 14:55 | 5252829 q99x2
q99x2's picture

The bankers will own everything when this blows up. How convenient.

Wed, 09/24/2014 - 15:11 | 5252891 Elliptico
Elliptico's picture

Facebook and Zillow their top picks. 

Wed, 09/24/2014 - 15:36 | 5252950 Itchy and Scratchy
Itchy and Scratchy's picture

This is the REAL story within the story! Well done ZH!

Wed, 09/24/2014 - 16:40 | 5253252 Irishcyclist
Irishcyclist's picture

And to think that Japan was the worlds leading economy in the 1970's and 1980's. I remember that at the time many western business people were being advised to take Japanese language courses because Japan was where it was at.

And Japan's since been reduced to this.

Wed, 09/24/2014 - 17:23 | 5253395 css1971
css1971's picture

It's like, we sent the Keynesians over to sabotage their economy.

Wed, 09/24/2014 - 16:49 | 5253280 yogibear
yogibear's picture

More and more central banks supporting higher asset prices with money from thin air. Keeping prices high while wages remain low in the US while going lower as compettition for jobs increases.

People in the US get desperate to exist. Companies increase they exposure to an overseas workforce.

As more companies leave the US and people borrow more to live it becomes tougher to make it in the US. Eventually it affects demand.

Wed, 09/24/2014 - 17:21 | 5253385 css1971
css1971's picture

Wow, get the popcorn!

The central bank will own EVERYTHING!

 

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