The Bank of Japan is on a rampage buying everything in sight, from stocks to bonds. It’s on course to becoming the largest shareholder of 55 companies by the end of the year.
Please consider The Bank of Japan’s Unstoppable Rise to Shareholder No. 1.
The Bank of Japan’s controversial march to the top of shareholder rankings in the world’s third-largest equity market is picking up pace.
Already a top-five owner of 81 companies in Japan’s Nikkei 225 Stock Average, the BOJ is on course to become the No. 1 shareholder in 55 of those firms by the end of next year, according to estimates compiled by Bloomberg from the central bank’s exchange-traded fund holdings. BOJ Governor Haruhiko Kuroda almost doubled his annual ETF buying target last month, adding to an unprecedented campaign to revitalize Japan’s stagnant economy.
The central bank’s influence on Japanese stocks already rivals that of the biggest traders, often called “whales” in the industry jargon. It’s the No. 1 shareholder in piano maker Yamaha Corp., Bloomberg estimates show, after its ownership stake via ETFs climbed to about 5.9 percent.
The BOJ is set to become the top holder of about five other Nikkei 225 companies by year-end, after boosting its annual ETF buying target to 6 trillion yen last month. By 2017, the central bank will rank No. 1 in about a quarter of the index’s members, including Olympus Corp., the world’s biggest maker of endoscopes; Fanuc Corp., the largest producer of industrial robots; and Advantest Corp., one of the top manufacturers of semiconductor-testing devices.
The free float at Fast Retailing Co., whose top weighting in the Nikkei 225 makes it a major recipient of BOJ money, is about 25 percent of shares outstanding. The BOJ owns about half the company’s free float now, a proportion that will rise to 63 percent by year-end, according to Nomura Holdings Inc., Japan’s biggest brokerage.
BOJ purchases could soak up the remaining free float at companies including Comsys Holdings Corp. and Tokyo Electron Ltd. over the next year, according to analysts at Goldman Sachs Group Inc.
“It’s going to become hard to trade,” Ito said. “Stocks that have a low free-float ratio will become very volatile.”
“The BOJ being a stable shareholder of such a large ratio of stocks is going to make investors question if governance is being held to account, and the debate around this is going to get more aggressive as they increase holdings,” Sumitomo Mitsui’s Ichikawa said. “People are going to question how long the BOJ should keep this policy going.”
Central bank actions are already beyond crazy, and it’s going to get worse. Yet people wonder why gold has been going up.
Mike “Mish” Shedlock
Isn’t it amazing that no other country or civilization in the history of mankind has figured out this easy path to prosperity?
No hard work needed.
No sacrifice needed.
No saving for the future.
All you need is zero to negative interest rates, massive debt that will never be repaid, easy and cheap credit, debase your currency and print like there is no tomorrow.
We all know how this will end.
Misery, ruin and bankruptcy.
And in war.
So why do governments and political parties do it?
To hold on to power as long as possible.
Japan, the EU, America, …
Is there an end game? Once all major Japanese corporations are effectively owned by BOJ, what next? Does BOJ then officially become a branch of Japan.gov?
If the economy still does meet Japan.gov standards, does the BOJ or Japan.gov start buying up private assets like gold, jewelry, artworks, real estate, vehicles, housing, office buildings? Perhaps a dress rehearsal for USA.gov and the FED and the EU collective in the long march to total socialist equality. No reason I can see to prevent any government from printing up unlimited quantities of fiat money and via the police power of the state enforcing a sort of eminent domain and nationalizing all means of production; a clever variant or path towards Marxism.
LIKE Same happening here.
Easily Targeted Furniture
Extra Totally Fooked
This is the greatest scam in history: Central Banks buying real assets with electrons. https://www.sec.gov/Archives/edgar/data/1582202/000158220216000007/0001582202-16-000007-index.htm …
Central banks Buy 21% of JAB Holdings Bond Issue (Keurig, Peet’s, Einstein Bros, etc)
The European Central Bank (ECB) is showing its love of coffee by purchasing 21% of JAB Holdings Bond issue. Sitting through all those meetings requires something stronger than Perrier water.
What does JAB Holdings hold? Keurig-Green Mountain Coffee, Peet’s Coffee, Einstein Bros Bagels and Coffee, Caribou Coffee, Stumptown Coffee, Krispy Kreme Doughnuts and Coffee, Douwe Egbert’s Coffee, Gelvalia Coffee, etc. In others words, a LOT of coffee.
Central banks purchasing corporate bonds is unusual and signals how bad things are in Europe. When the Central Banks try to keep coffee producers afloat.
stunning. fools rush in where angels fear to tread……
Mark Morris said:
Hi Mish, QE to buy equities is just a gradual nationalisation of all the biggest companies is it not?
It seems like a march towards communism…
Can they leverage and take the other side of naked shorts so they can own far more than 100%?
They can go 100% naked to leverage some shorts if they want to , by walking out without putting on their invisible clothes , all part of the uncertainty principle .
Would you know if someone wasn’t wearing their invisible clothes if they didn’t tell you ?
James Greenberg said:
I think it’s time to re-post the Fed Uncertainty Principle as a refresher.
I guess it’s printing all the way down.
This is only the tip of the proverbial iceberg , for many countries .
How much investment is indirectly accumulated and held by government associates .
How much investment , and hence the direction of enterprise , is there indirectly sponsored by government and CB initiative .
How much of the value held by private investors is actually by benefit and hence at the mercy of government .
How much of the economy is directly funded via government by its common expenditure .
The list is much much larger still , and extends into just about every nook of our existence nowadays . I have met few people who do not constantly hold some concept related to government in their minds which they constantly compare their actions to , and a great many I know are completely caught up in the flow in some way , often without even realizing it properly , or at all .
We tend to be taught it is ‘the rich’ , but it is really people who are well beyond rich that manage this all , their objectives are very different. Money is power to them , it is not some simple token of participation. It is that power which draws other people in , the expectation of some kind of financial reward being nothing more than a lure .
What you write rings of the truth. The government has quietly expanded through many quasi government organizations, these by nature reach out to expand the influence and power of their directors. Instead of focusing on the business of government and simplicity, this new proactive movement, disguised in the shawl of flexible and diversity is being expanded, and we are paying the tab. Government is proud of pet projects, it allows bureaucrats to experiment and try new things without the personal financial risk of a businessman, they are creative on our dime This is a problem for concern. The best time to kill a monster is while its still small, that time has passed, now we can only hope to slow its growth through starvation, and that is unlikely. They article below looks at how many of these groups are not even seen as “government.”
Ozark Mark said:
I’m sorry, but this is simply absurd. The BoJ is literally buying the country with printed capital…am I allowed to say its fucking retarded? Because that is all I can really say…
I say you are allowed to …
Anyone object ?
… I always get confused about how something gets more national when it is owned by the state . They say it is publicly owned , so why are initial public offerings offered to the public ? Maybe there are different kinds of national public , national ones and not national ones ? Why do they nationalize the companies instead of nationalizing the non national nationals ? It all seems to take place privately too , that would give us the private public and the public private , the publicly public being actually privately private , and the private private non existent because only the publicly private is allowed .
I always get confused over this .
Hillary will explain day 1 in office…
Andrew Anderson said:
Well, at least the BoJ will have plenty of assets for sterilization purposes though a central bank should never buy private assets.
Anyway, remember Steve Keen’s “A Modern Jubilee”?
That hadn’t been tried yet but here’s how it could work. Please note a central bank can operate with negative equity:
1) Use BoJ equity, including negative equity if necessary, to give new fiat equally to all Japanese citizens. But do it by instalments, say 1 per month for a year.
2) After each instalment is distributed, sell BoJ assets to sterilize that instalment. Note that the additional fiat provided by the instalment should boost the prices the BoJ can sell assets for and thus increase BoJ equity to compensate for the fiat give-aways, perhaps not 100% but substantially.
So basically, the BoJ would loose some equity but Japanese citizens would get “A Modern Jubilee” with no increase in reserves so no one could complain of debt being inflated away.
Slick–back door nationalization of once-public companies. More to come!
eric – I had not thought of it that way – food for thought!
The Zimbabwe national bank owns 100% of their stock market, and they have the economy (and tax base) to prove it.
Japan is f#cked, to use the trading desk vernacular. Unpayable debts on top of unfunded promises, angry neighbors who never got an apology for WW2 comfort women (oh, and the bombing / killing thing too) — and the country’s demographics closely resemble the Mayan ruins… I mean empire.
And their “leadership” is so messed up they can’t lie fast enough. Still think the Fukushima reactor mess is well contained? Maybe that is why Abe sought the advice of Bernanke recently — you know: the subprime contagion is well contained too.
Printing more yen (physically or electronically) will not generate a population big enough to keep the lights on, much less pay the bills.
Abe wants to restart the Japanese military offense abilities (that should make the WW2 comfort women feel safe!), but even a robot army needs some humans. Japan has ghost town after ghost town — even the suburbs around Tokyo are getting empty… young people are moving into cities (especially Tokyo) because they can’t find a mate in small villages (the village is empty, except for a handful of old people).
While the Bank of Japan fiddles, Japan’s demographics burn.
The question is how long it will take them to realize they have another policy tool here. They can use their ownership stakes to demand broad-based changes to corporate practices, like increased hiring or wages.
As Eric above already mentioned, this is back door nationalization of once-public companies. Government led socialism in full swing.
My belief is that in the long run it will be ruinous creating such a bubble that we all will suffer.
But that’s how socialism functions. Only the elite politicians and their peers will have a nice life. North Korea will be the future. Everything will look perfect on the paper.
You can call it communism, fascism, socialism, etc.
The word doesn’t matter. The result is that it kills all incentive to create competition, and it kills all incentive to increase productivity. All because the powers that be are scared to death of price discovery.
Andrew Anderson said:
All because the powers that be are scared to death of price discovery. robs
If the inflation caused by government subsidies for private credit creation is immoral then what makes you think the eventual deflation inherent in such a system is moral? Do two wrongs make a right?
Or is the proper way to remove a barbed arrow to pull it out?
Perhaps BOJ stock buying is step 1 in asset redistribution. Hard to imagine them being smart enough to deliberately do it this way, versus an unintended consequence.
Think of the leverage of the employees, both workers and management, if the enterprise’s stock is 100% gov/BOJ owned. The employees organize and fund some rice farmers to feed them; then tell BOJ/Japan.gov to redistribute half the stock to the employees or they will shutdown and sabotage the company. Since BOJ/Japan.gov essentially spent nothing to print the fiat money to acquire the stock, their loss is zero if the company employees shutdown and destroy the company and go to subsistence living. Will be real interesting mess. Shaping up to be more interesting world, if nothing else.
I remain amazed that many people still consider the Japanese yen a “safe haven” currency. This flies in the face of reason. For years many economist have looked at Japans economic path and predicted an economic crisis brought on by the growing debt of its government. The reality is that much like the situation that developed in Greece it is clear that Japan is facing a wall of debt that it will never be able to repay.
The myth promoted by the central banks that a major currency cannot fail is accepted as fact by many people however, the rapid demise of either the yen or the euro is all that will be needed to reveal the truth and remind people everywhere that our system of fiat money is held together only by faith in the system and a prayer. below is an article making the case the yen is destined to fail.
Brian E Considine (@e_considine) said:
Actually the solution is very simple. The gov’t of Japan should increase their deficit even more. Cut taxes, increase spending. If Japan doesn’t seem to need infrastructure spending then give cash assistance to those who make less than the median income.
There’s no reason why the Central Bank then would have to buy corporate bonds or corporate stock. Every bond or share purchased could have been a gov’t bond thereby eliminating the need to buy private assets.
Excellent catch, as usual. This is very good to know.
The question is, when will the house of cards fall?
It’s also instructive to see the role of Governments revealed.
For decades, from the 1930s until the 1980s, the U.S. Government’s job was to a) invest in infrastructure and public education; b) restrict the Labor supply so that Wages & Salaries remain *high*; c) defend the nation; d) use the Sherman Anti-Trust Act to prevent the formation of monopolies; e) enforce regulations to maintain a safe workplace, prevent Workers from getting screwed, and later on, protect the environment.
Government was, also, in many ways, the Employer of Last Resort. Just about anyone could get a government job, and could house, shelter, & feed themselves with it.
Bottom line: the Government, and the Goverened, recognized that the best environment for business is one where you have lots of Customers who have disposable income, time to spend it, and a positive outlook on their economic future. The Government maintained a balance between the interests of Capital and Labor.
Now look at today. Government’s role is now 1) to allow and encourage the formation of monopolies; 2) avoid enforcing laws against illegal hiring; 3) find new export markets (when domestic markets begin to fail); 4) be the Buyer of Last Resort for Treasuries (to keep interest rates low & “stimulate Demand”); 5) support equity markets: be the Buyer of Last Resort for ETFs(Japan), or through QE (U.S. & EU).
This unbalanced favoritism toward Capital, at the expense of Labor, prevents the Capitalists from funding their own Customers through Wages & Salaries. It prevents Capitalism from being Sustainable.
Both Workers and Investors are waiting for the other shoe to drop.
Mox Nix said:
Are there any statistics about how much insider selling (to the BOJ) is happening? Getting out before the collapse, then crying poverty and putting a few terminally ill people in jail several years after the fact is a cheap way to screw your retiree/saving for retirement population.
Printing is confiscation. The bank is slowly confiscating food and appliances from Japanese pensioners and savers, then using the loot to obtain ownership of Japanese companies. Pity the poor Japanese elders if this banker confiscation continues.