Japanese Government Now The Largest Shareholder Of 474 Big Companies

Tyler Durden's picture

Submitted by Wolf Richter via WolfStreet.com,

The two biggest buyers of Japan Inc. are flying blind and don’t care.

The Bank of Japan and the Government Pension Investment Fund (GPIF) have been buying stocks to inflate the market, create some kind of “wealth effect,” and bamboozle regular Japanese into pouring once again into stocks, after many of them lost a big chunk of their savings when the prior bubble imploded without ever recovering.

In 2014, the GPIF – buckling under the pressure from the Abe administration – decided to plow about 25% (“±9%”) of its assets into Japanese stocks. With assets at the time of still about $1.4 trillion, 25% would amount to about $350 billion. So the fund has been buying a lot! And it has been a disaster! [Read…  Japan Mega-Pension Fund Dives into Stocks, Foreign Assets, Loses Shirt. People Not Amused]

But even after Japanese stocks took a licking over the past year, the fund’s allocation to domestic equities is still 21%, so near its range and no longer a powerful buyer. But to make up for any holes left behind by the pension fund, the BOJ announced on July 28 that it would nearly double its annual purchases of equity ETFs to ¥6 trillion ($59 billion).

The holdings of Japanese stocks by these two entities have nearly tripled over the past five fiscal years to about ¥39 trillion ($381 billion), according to The Nikkei. During that time, the Nikkei stock index soared 70%, “demonstrating their powerful support.”

But, but, but… the index remains 57% below its bubble peak of 1989.

So what has this done to overall government ownership of Japanese stocks? We don’t really know, because it’s kept purposefully opaque, according to The Nikkei:

These major public-sector buyers do not appear on shareholder lists because of their indirect ownership via trust banks and other intermediaries.

And yet, The Nikkei figured that “the two together are the largest shareholders for 474 of about 1,970 stocks” on the Tokyo Stock Exchange’s first section (the section for large companies), “based on public information.”

And this is just the beginning.

So for example, between the GPIF and the BOJ, they own 17% of TDK, 16.5% of Advantest, 14.2% of Nitto Denko, 14.2% of Yokogawa Electric, more than 10% of entertainment company Konami Holdings and security services provider Secom.

“We hope they will hold the shares over the long term,” fretted an official of Yokogawa Electric. Because if they ever tried to sell those shares, all heck would break loose.

Overall, the BOJ and the GPIF now hold over 7% of stocks in the first section of the TSE. By contrast the largest private-sector stockholder, Nippon Life Insurance, holds only about 2% of the stocks in the first section.

So hopes are high that the BOJ’s buying binge of ¥6 trillion in equity ETFs, and whatever the GPIF might still buy – though it’s largely finished as a buyer – will inflate the market. Nomura Securities chief strategist Hisao Matsuura thinks that the ¥6 trillion a year from the BOJ alone will inflate the Nikkei index by 2,000 points per year, or about 12%… year after year… come hell or high water, one would assume, because according to this logic, nothing else but central-bank and government-pension-fund buying matters.

If companies have declining sales, losses, and nightmarish management, it wouldn’t matter. These companies would still be able to raise funds and go on as if nothing happened because there will be a relentless and dumb bid, and their stocks would soar since the BOJ and GPIF are passive shareholders, blindly buying equities mostly in form of ETFs. Owners of ETFs cannot dump individual stocks; they cannot punish companies by selling their shares – the most fundamental action of the market.

In other words, the largest most relentless buyers and owners of Japan Inc. are blind, dumb, and mute. That might suit Japan Inc. just fine. Entrenched management coddled by these big passive investors has nothing to worry about. Forget the discipline of the market, or price discovery, or pressures on corporate governance, or any other function of the market. They will all disappear – if they haven’t already.

In this scenario, companies can turn into zombies while the BOJ and the GPIF will still be loading up on ETFs that contain these shares and keep their prices high. And keeping prices artificially high is the only goal of all this buying.

Neither the BOJ nor the GPIF could ever unload these ETFs without unwinding the stock price inflation their relentless and blind buying has caused. And in turn, if the BOJ and the GPIF start selling their ETFs, even high-performing companies would see their share prices get eviscerated.

With these two public elephants in the room, nothing else matters. And this has some ironic consequences, according to Shingo Ide, chief equity strategist at NLI Research Institute: “Regular investors who focus on company analyses may hesitate to buy.” And that may have something to do with the swoon of Japanese stocks over the past 12 months.

But the BOJ is already fretting about the next crash and is building up a big pile of dry powder. Read…  Bank of Japan Prepares for Crash Triggered by Fed Tightening

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Pinto Currency's picture

And so the state takes over the economy without a shot being fired.

knukles's picture

Exactly.
Deeper doo doo than most people even here, realize.
Bring the capitalists to their knees with their own tools.
Power to the Few Obscenely Wealthy

Squid-puppets a-go-go's picture

its the worst possible version of Nationalisation - by stealth, and at the greatest probable expense to jpanese taxpayers

if these CB fucksticks had half a brain they'd engineer the collapse THEN buy the stawx and bid them back up

what a fucking collossal destruction of Capital is going to result from all this fiscal Infantocracy

Tom Servo's picture

ETA until they "own everything", then what's next?  Buying all of the BOVESPA? lol

 

Pinto Currency's picture

This c.b. nationalisation of the economy by stealth is necessary so that it all happens before anyone has an opportunity to comment or mount opposition.

These are not bumbling fools but these acts are by design by those behind the scenes.

Note Yellin saying that they needed to buy a wider range of assets?

Ever wonder why Stanley Fischer wears that shit-eating grin?

Reichstag Fire Dept.'s picture

Public companies are essentially being taken private with all this "asset" buying...the real question is why? What is the end game of taking the world "private"?

Syrin's picture

I don't get it.   The Japanese are no where near as stupid as Americans, yet they let this happen.

froze25's picture

They are truly insane,  hey Japanese people you want to grow again?  Let deflation happen,  get prices back to normal,  start having children again,  and get off the fiat currency BS .

Pumpkin's picture

That is a spiritual lesson.  Make believe gods (fiat and Satan).  Satan is fiat, and his greatest invention.

Snaffew's picture

at this point in the human evolutionary cycle...growth is bad.  Japan should be commended for a shrinking population, and hence a shrinking economy.  The natural result should be a lower GDP and cheaper stock market.  Why the world thinks that contraction is bad is beyond me.  You cannot grow to peretuity...the world simply cannot handle it.  You have to hgit the brakes and back up at some point.  You either do it consciously and responsibly, or you do it the hard way through shortages and the imminent war over resources.

nmewn's picture

But but but...if the government is the people...then then then...the people own them, right? (whimper)...ahhh well, another "progressive" talking point goes up in flames...lol.

south40_dreams's picture

I think we're turning Japanese

gaoptimize's picture

I did that at Karoke a couple months ago.  A classic so appropriate to the current situation.

CHoward's picture

These fucking idiots can't honestly believe this is how to run an economy - it's impossible. 

RawPawg's picture

China shows up uninvited
there,China fixed it for ya(not now,but soon,very soon)

itstippy's picture

Please do not worry.

medium giraffe's picture

stocks green = everything is awesome

ssdd

djsmps's picture

I am eagerly waiting for the day they get off the hook by saying, "I apologize."

Dr. Engali's picture

I've said it from the beginning. It's the biggest leverage buyout in history. The central banks will own it all, and the only thing the shareholders will have to show for it is some digital fiat that can be diluted at will.

pitz's picture

Shareholders don't need to sell into the central bank bid. 

medium giraffe's picture

agree.  Good to see you Dr E

pitz's picture

Its a lot better than the Fed buying MBS and the various other crap (like US Treasuries) that are on their balance sheet. 

King Tut's picture
King Tut (not verified) pitz Aug 29, 2016 7:34 PM

The lesser of 2 evils is still evil

itstippy's picture

Does the U.S. have a "Government Employees Pension Fund"?  How do we pay the retired Secret Service goons, CIA/DHS/NSA spooks, and career politicians' pensions?  Anyone know?  

Grandad Grumps's picture

Well, the Bank of Japan is supposedly an entity independent from the Japanese Government, which means that it controls the Japanese government. "The hand that gives is above the hand that receives"... and ... "Give me control of a country's money supply and I care not who makes the laws".

So, it is really not the Japanese government who owns over 50% of the stock, it is the banking empire and its government proxy.

Mine Is Bigger's picture

I think the Japanese government (the Ministry of Fiance) holds a majority stake in the Bank of Japan, and the rest are traded on the Tokyo Stock Exchange. So, it is quite different from the Federal Reserve system in terms of the ownership structure.

But then again, they are both evil institutions that are largely responsible for wars and siphoning of the public wealth. So, I guess it is beside the point.

gaoptimize's picture

Fascism, bought, not imposed by policy or law.  This will end poorly.

Heterodox economics's picture

Yep, this is economic fascism.  Another contemporary example of economic fascism is the European Union.

Yet, the populist politicians who are opposed to this economic arrangement are smeared as fascists.  The pot calling the kettle black.

 

Offthebeach's picture

Can a Company owned by a central bank, borow from the central bank, default and get bailed out by the central bank?

lucky and good's picture

It is difficult to imagine the yen has much more upside considering how with each jump it damages Japan's export driven economy. The big question is where the yen will go from here. To many Japan watchers the country is between a rock and a hard spot as a recession looming in the next quarter.

It is getting more difficult to ignore that Japan is facing a mountain of debt that can only be addressed by printing more money and debasing their currency. This means paying off their debt with worthless yen where possible and in many cases defaulting on promise.

Japan is stuck with an aging and shrinking population that with each day becomes more expensive for the government to provide for. Simply put, the fundamentals for Japan are lousy. More about this in the article below.

 http://brucewilds.blogspot.com/2016/02/japan-is-falling-into-economic-abyss.html

consider me gone's picture

Do they vote the shares? They probably do or are at least in the temptation stage. What happens when they vote for company officers who don't know squat about running a company? Sounds similar to communism. 

Hope Copy's picture

Japan is on the 'second road' to super socialism, what is commonly called communism with the government regulators becoming the de facto politburo...!

Publicus's picture

Central bank is another word for communism.

Blopper's picture

Corporations are just like a physical body. And ownership of corporations is like owning this body.

But the body needs blood to live. And blood in economy is money/currency.

And there are several types of blood A/B/AB/O. The same is with several types of monies/currencies - fiat currencies, gold, and cryptocurrency.

If the world over desires to take control of earth back from the jewish banking cartel scums, then the people must select to use the right currency wisely.

If you choose the right currency, i.e. the right blood for the body, you will exceed any advantages the jewish scums have in owning the body.

Heck, you don't even need to own the body to win the battle against the banking scums.

 

Update:

And the best part is, it's the blood that controls the body. Deprive the body of the right blood and the body dies. Rejuvenate the body with a different blood and you will get a different body.

Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) Aug 30, 2016 12:15 AM

Same thing is going on in the USA and Europe. The USA is the only one hiding it. Mostly because the USA = private Jews.

onmail1's picture

Welcome to the future of economy

where all the companies will be owned by the state

HAh ha

(btw will it be called capitalism/free market)

QE has become like a Black Hole

that sucks everything & leaves u nothing

 

Expat's picture

Why not simply do with stock prices what Dubai did with real estate prices?  Put in place a ratchet system which forbids prices from dropping; they can only go up.  We can do this with everything...except wages, because that would be socialism and we certainly would not want to be dirty, fascist, nasty commie socialists, would we.

One can only hope for the sake of the universe writ large that humanity either mutates dramatically or kills itself off before developing interstellar travel.  Fucking up one planet is enough, please.

Iconoclast421's picture

What will they do when they own the entire stock market, all stock markets, all equity, around the world?

Vin's picture

Is the BOJ a private bank like our FED?

fireant's picture

Wished I had a printing press, I could buy lots of crap too

NEOSERF's picture

There is no "crash" if the BOJ owns all the stocks.  The economic indicators might be poor and when the BOJ stops funneling printed money into money losing ventures and those managers can't make payroll, there may be a Depression but their stock market won't move because it is in rigormortis...retail and professional money will increasingly abandon Japanese stocks and have to move to the US which means there is probably one more blowoff to 20K and 30x PE ratio before the whole thing dies...would guess this goes on until about 2020.