WTF Chart Of The Day: BoJ Now Owns 75% of Japanese ETFs

Tyler Durden's picture

While ECB President Mario Draghi faces his own German-bond-market constraints in his hubristic bond-buying-bonanza, cornering him to taper sooner than later; the Bank of Japan appears to have thrown every textbook out of the window and cranked their plunge-protection to '11', as Bloomberg reports, The Bank of Japan now holds 75% of the nation's ETFs.

Since December 2010 - when The Bank of Japan held no ETFs at all - the central bank has been buying ETFs  (doubling its annual buying target to 6 trillion yen in July 2016) as part of unprecedented economic stimulus. While the Nikkei 225 Stock Average has risen 89% since December 2010, the BOJ’s dominance of the ETF market has raised concerns.

In fact, in a circular vicious cycle, the Bank of Japan’s purchases have helped assets managed by ETFs surge almost 10-fold since the end of 2010 to 25 trillion yen ($230 billion).

As the chart below shows, the central bank now owns three quarters of such funds by market value...

Even the head of Japan’s stock exchange Akira Kiyotasays he is unsettled by the risk of "constant distortion" posed by the central bank’s exchange-traded fund buying.

The impact on Japan’s overall stock market may be limited because the total value of BOJ ETF holdings is the equivalent of just 5 percent of the Topix market capitalization.

But, any tapering of such purchases may erode demand, particularly for stocks in which it is a dominant shareholder.

At this rate, the BOJ could dominate 80 percent of the ETF market by year-end.

Once it decides to stop buying, or even start selling, it’s not clear what the stock market impact will be or who will buy that amount of ETFs.

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buzzsaw99's picture

the etf managers are getting a fat fascist management fee.

Bay of Pigs's picture

When I was in Thailand last year I read a quote from a trader in the Bangkok Times saying that NOBODY owned long dated Japanese bonds except the BOJ.

NoDebt's picture

Take everything from the banks but allow them to continue to control the money supply and they will, the very next day, begin creating new money and buy everything back again.

Somebody said words to that effect a long time ago.  I forget who.  I'm sure they were white and I'm sure they're dead by now so it probably doesn't matter and probably isn't germain to this conversation anyway.

Forget I said anything.  Just go about your business.  The study of history is worthless because it's different this time.



GUS100CORRINA's picture

WTF Chart Of The Day: BoJ Now Owns 75% of Japanese ETFs

My response: The CENTRAL BANKS are made up os SINFUL HUMAN BEINGS. Anything is possible when MAN is out of control and has absolute power. 


This is the main reason that the USA has three branches of government so the each branch keeps the other branch in check..

Finally, the DOCTRINE of HUMAN DEPRAVITY states that the HUMAN HEART is DECEITFUL above all else and DEPARATELY WICKED.

This is very scary stuff.

philipat's picture

@ND. Hold on for a moment. When we reach the point that BOJ holds ALL the ETF's, from that point on they can only sell them right? And what will that do to prices? Only BOJ can continue to print money and your comment suggests that they will have to continue to do so indefinitely? Maybe we are all wrong and this CAN continue indefinitely and that hyperinflation will never be an issue because of the deflationary/money velocity constraints (aka a VERY weak economy)? In other words, to support your thesis, we have to believe that Central bankers REALLY are Masters of the Universe and that it REALLY IS different this time?

bonin006's picture

Once they own them all they can sell them to themselves at whatever price they want them to be. If they sold to others they would lose control, so just don't do that. Instead, use them as collateral to borrow more money. They can increase the collateral value as much as required to offset the debt, so they can then get the debt to GDP ratio back to a responsible level.

I must be genius to have figured this out with only one undergraduate economics class 38 years ago. I should have worked for Enron.

sodbuster's picture

>Once it decides to stop buying, or even start selling, it’s not clear what the stock market impact will be or who will buy that amount of ETFs.<  You're shitting me!!!! I think it's pretty f'n clear what the impact will be!!!

GUS100CORRINA's picture

WTF Chart Of The Day: BoJ Now Owns 75% of Japanese ETFs

My response: The CENTRAL BANKS are made up os SINFUL HUMAN BEINGS. Anything is possible when MAN is out of control and has absolute power. 


This is the main reason that the USA has three branches of government so the each branch keeps the other branches in check..

Finally, the DOCTRINE of HUMAN DEPRAVITY states that the HUMAN HEART is DECEITFUL above all else and DEPARATELY WICKED.

This is very scary stuff. Japan is a society who worships many gods (idolatry). It is hard to know which god is in control from day to day.

PlayMoney's picture

And when they own 100% of the ETFs? I suppose they create more ETFs, then buy them from themselves? Yeah thats it.

Ring_Of_Fire's picture

This is just pathetic.. This bullshit is going to end in major disaster and suffering for billions soon..

bluskyes's picture

ETF squared, then synthetic ETFs. Leverage them 100x and unleash enough currency to soak up the ocean.

philipat's picture

And then the IMF does the same using SDR's? Perhaps this actually CAN go on forever? It's different this time now that the Central Bank Masters of the Universe have unlocked the secrets of Uranus? After all, the "Elites" seem quite happy?

Neil Patrick Harris's picture

So this essentially amounts to price controls on ETFs, does that mean we could one day see an ETF black market?

BandGap's picture

Seriously, just another sign this is totally fucked up. Say what they want about this and that but the argument 5 years ago was about the ethics of this even occuring. Now the baby is full term and people are wondering what happens?

Stop these discussions that start with total bullshit, and by that I mean scenarios where "what happens next?" that arise from circumstances that were unacceptable 5 years ago. Really, enough of this shit.

We're discussing the viability of situations that 5 years ago were the signal of the end of the system. Face it, this is the end of the system and really should be the end of the discussions about "what happens next?" with the fucked up system. There is no way out at this point, fuckers. And the talk is just getting cheaper and on my fucking nerves.

Can we admit that we saw this coming even though we know it would look like a shit tsunami? I do. Get fucking ready already.

EndOfDayExit's picture

My guess is that next happpens Socialism (or maybe it is called Neo-Feudalism)? And very peacefully at that. CBs will eventually own 51+% of all major publicly traded corporations, at which point TPTB will get together for a little talk of what options they have just got opened to them.

This is unless pitchforks happen before that, which so far appears very unlikely.

philipat's picture

By definition, when "The State" owns all means of production that is Communism (Where all animals are equal but some are more equal than others?). But then what difference would that make for the 99%?

The Political spectrum is more like a circle. Moving towards the Far Right OR The far Left moves around the circle to the point they both meet and definitions become merely words..

Sam Clemons's picture

Central banks are private. Not public. I don't know what you'd call it other than someone who shouldn't own something owning it by printing fiat.

Blue Steel 309's picture

If people knew how much of the DOW, S&P and NASDAQ were owned by central banks, they might raise a slight ruckus, because it doesn't concern them and their next paycheck.

myne's picture

Pro tip: start an etf domiciled in Japan.

Pump and dump style.


Can't lose! 

venturen's picture

please...someone convince me this can end well?

Can people accept free money for the few. At some point they are going to get mad....very mad!

NoDebt's picture

On the off chance they get mad it will be at the wrong people anyway.  You're good.  Go to bed.  The land of the rising sun will rise again tomorrow.  


Deplorable's picture

I'm mad as hell and I am not going to take this anymore.....

Just kidding.

Catullus's picture

Sure. They muddle through for decades buying up any dip and diluting the currency while imports slowly get more expensive. Then china comes to them with the deal of a lifetime when they adopt a gold-back currency. The BOJ does a massive yuan-equity swap and the Japanese exports are diverted from the US to China.

Wilcox1's picture

Do dey habve blak swans in japon

PlayMoney's picture

black swans are no longer allowed

Caloot's picture

Japanese are pretty angry people when driven to it.   Something tells me when the market collapse occurs the Marxist rebellion will return the nation to it's totalitarian self.   I imagine that island will feel very small in the not too distant future.

Clock Crasher's picture

Only 25% percent left to go.


Clock Crasher's picture

I see.....  Americas future.

Legislation is already written.  Turn key solutions brought to you by Satan and company.

NoDebt's picture

"I see.....  Americas future."

Exactly.  If you take solace in nothing else, please take solice in the fact that there are TONS of financial games left to be played before this game ends.


Paul Morphy's picture

And when central banks reach the point where what's on their balance sheet cannot be managed, what then?

Who else will buy all that junk on their balance sheet?

venturen's picture

they haven't even created the UN Central Bank with unlimited Crypto currency! 

venturen's picture

and to think for generation...we thought you had to make things to create wealth.... 

....The Central Bankers have found perpetual motion, Lead to Gold, Nirvana, shangri la, fountain of youth, free last! 

Deplorable's picture

It will stop when NK drops a nuke on them.

Truth Eater's picture

Get people to allow you to print your own money and you can buy the world.

Catullus's picture

I would be dilluting the fuck out of my ETF if I were the fund manager

WTFUD's picture

We wont rest until we reach 100% ownership . . and you can take that to the bank!

NoDebt's picture

You are young.  You will live to see that day.


TheSilentMajority's picture

The catch is that nobody ever said they ever need to stop printing and buying or ever sell.

This can go on forever and ever and ever.

BeanusCountus's picture

You would think so, but.... if it was all this easy then a 5 year old could do it. Personally, I think this is a sign that collapse is closer than it looks. Trillion $ coins, CB's supporting (controlling) markets, etc, etc. Keep in mind this is ALL a "confidence" game. Any loss of confidence can blow up pretty fast.

GotAFriendInBen's picture

Fed probably no different

No audit

No matter

Atlas Crapped's picture

Japan system has always been the guinea pig of western policy experimentation. Also the canary in the mine. Even their social "progress" is a preview of the Western model future.

Such is the fate of honor defeated.

GotAFriendInBen's picture

Good thing is with ETFs has dispensable as fiat, they can never own 100%

Always some left for suc...err...investors

GooseShtepping Moron's picture

There is a lesson in this for all those who like to jump into the comments and say things like "Yeah, QE infinity!" and "CTRL-P, Bitchez!"

The central banks cannot simply print to infinity. There is a hard limit in the amount of QE that can be applied, because eventually they will run out of assets to purchase. Once there is no more collateral with which to leverage monetary injections, the choice is either to turn off the spigots or go for full-blown hyperinflation. However, long before that point is reached, the central banks will face another dilemma inasmuch as you cannot be the majority shareholder of a corporation without assuming fiduciary responsibility for its operations. The banks are completely ill-equipped to play that role. As they assume more and more stake in major corporations without bothering to manage them effectively, the businesses themselves are going to fall apart. Now we're talking about actual, physical damage to the economy as real as the damage caused by any storm or earthquake. At that point all popular sentiment will turn viciously against the whole QE experiement and somebody, either a populist leader or a foreign power, will rise up and put it in the grave. The central banks have overextended their mandate and lost control.

Wilcox1's picture

Great point about the fiduciary duty. As long as people know about it, it will be a constraint.

Pernicious Gold Phallusy's picture

You're using the phrases "fiduciary duty" and "central bank" in the same sentence?

YesWeKahn's picture

I own 15% of my company right now, a good startup company, we are profitable, FED, JFED, EFED, BFED, please buy my shares.

Pernicious Gold Phallusy's picture

If the Band of Japan sells each fund to itself at a slightly higher price each transaction, and keep boosting each ETF value by 1%-2% a week, pretty soon people will be banging down the door to buy Japanese ETFs. Then the BOJ can sell out suddenly. If the BOJ keeps it up long enough they might be able to fund the retirements of everybody in Japan.

Reminds me of a wealth-building company (let's call them SC) my then accounting firm told me I should invest with back in the 1980s. I figured out the story I am about to tell you by talking to a lot of people. It was not presented this way to me at all. At the time I didn't realize how crooked accounting firms were and are.

SC put together a group of professionals (Group A) to buy a tract of vacant land (Tract A) on the outskirts of the city. SC collected fees, fees and more fees. A couple of years later SC put together another group of different professionals (Group B) to buy Tract A at a substantially higher price from the Group B. SC collected fees, fees and more fees. Group A started blabbing to their professional friends about how much money they had made with SC. The professional blab recipients began banging on SC's door to get into the next deal. SC found another large tract of land (Tract B.) Group A bought Tract B. SC collected fees, fees and more fees. Group B sold Tract A to Group C. SC collected fees, fees and more fees. And so it went until 1986.

wow thats crazy's picture

So the ETF's will never go down. Sounds like a buy signal to me