The Bank of Japan (BOJ) may soon be the first central bank to own “everything”
- BOJ is now a top-10 shareholder in about 90% of the Nikkei 225 (the Japanese version of the S&P 500).
- It’s now a major shareholder of more Japanese “blue chip” companies than:
--- BlackRock, Inc. — the world’s largest money manager, and
--- The Vanguard Group (which oversees more than $3 trillion)
- BOJ began buying stocks in the summer of 2014 via exchange-traded fund (ETF) purchases.
- It’s bought $27.2 billion in ETFs every year since.
- it now owns 55% of the entire Japanese ETF market... and it’s just getting started
- BOJ may ramp up to over $55 billion in ETF purchases every year.
- Estimates show the BOJ becoming the # 1 shareholder in 90 of the top 225 Japanese firms by the end of 2017
This was not how central banking was sold to the world 100 years ago...
- The banks were to be the “lender of last resort”
- providing liquidity to other banks who’d gotten themselves into fiscal trouble.
- This was going to make bank runs and financial panics “a thing of the past”
- But that’s not what happened.
On the central banks’ watch, we’ve had
- a global deflationary depression in the ’30s
- the “Great Recession” in 2008-2009 and
- the destruction of “sound” (i.e., gold-backed) money
- It’s gotten the whole globe mired in trillions in debt
BOJ — like all central banks — conjures money out of nothing
- Using it to buy assets (like these ETFs) creates an artificial demand.
- This helped buoy the Japanese stock market from further declines, but
- it hasn’t sent it higher
- And no one seems to wonder what happens when (or how) they shut the program down...
- BOJ has financed the most aggressive asset-buying program in world history
- But it hasn’t succeeded in jump-starting the Japanese economy
- nor should anyone expect it to.
- We’re hitting the absolute limits of central bank intervention in the global economy
- When it ends... look out!
- Stay long gold and U.S. dollars