Ja­pan’s cen­tral bank is on a stock-buy­ing spree that may pick up speed

▶ The cen­tral bank props up share prices just as it has with bonds ▶ “This is clearly dis­tort­ing the san­ity of the stock mar­ket”

Bloomberg Businessweek (North America) - - Con­tents -

They may not re­al­ize it yet, but many of Ja­pan’s ex­ec­u­tives are work­ing for a share­holder un­like any other: the na­tion’s cen­tral bank. Since 2010 the Bank of Ja­pan has made 8.6 tril­lion y yen ($77 bil­lion) in ex­change-trad­edg fund pur­chases, be­com­ing a top 10 share­holder in about 90 per­cent of the Nikkei 225 stock av­er­age, ac­cord­ing to es­ti­mates com­piled by Bloomberg from pub­lic data. (ETFS are in­dex funds that trade like stocks.) The bank is a ma­jor owner of more Ja­panese blue chips than Black­rock, the world’s largest money man­ager, and Van­guard Group, the mu­tual fund gi­ant, com­bined.

To crit­ics al­ready wary of the BOJ’S out­size im­pact on the Ja­panese bond mar­ket, its grow­ing in­flu­ence in stocks risks dis­tort­ing val­u­a­tions and un­der­min­ing ef­forts to im­prove cor­po­rate gov­er­nance. Pro­po­nents say the pur­chases pro­vide a much needed boost to in­vestor con­fi­dence. With the Nikkei 225 down about 9 per­cent this year and in­fla­tion well be­low of­fi­cial tar­gets, a ma­jor­ity of an­a­lysts sur­veyed by Bloomberg pre­dicts the cen­tral bank will in­crease its ETF buy­ing. “For those who want shares to go up at any cost, it’s ab­so­lutely fan­tas­tic that the BOJ is buy­ing so much,” says Shingo Ide, chief eq­uity strate­gist at NLI Re­search In­sti­tute in Tokyo. “But this is clearly dis­tort­ing the san­ity of the stock mar­ket.”

Un­der its stim­u­lus plan, the BOJ buys about 3 tril­lion yen of ETFS ev­ery year. Although pol­i­cy­mak­ers don’t dis­close how those hold­ings trans­late into stakes of in­di­vid­ual com­pa­nies, es­ti­mates can be gleaned from pub­licly avail­able cen­tral bank records, reg­u­la­tory fil­ings by com­pa­nies and ETF man­agers, and sta­tis­tics from the in­dus­try group In­vest­ment Trusts As­so­ci­a­tion of Ja­pan. The BOJ de­clined to com­ment on Bloomberg’s find­ings.

The es­ti­mates re­veal a pres­ence in Ja­pan’s top com­pa­nies ri­valed by few other big in­vestors, of­ten called “whales” in in­dus­try jar­gon. The BOJ ef­fec­tively con­trols about 9 per­cent of Fast Re­tail­ing, the op­er­a­tor of Uniqlo stores, and al­most 5 per­cent of soy sauce maker Kikko­man. It has an es­ti­mated share­holder rank of No. 3 in both Yamaha, the maker of mu­si­cal in­stru­ments, and Daiwa House In­dus­try, Ja­pan’s top home­builder.

If the BOJ ac­cel­er­ates its ETF pur­chases soon to an an­nual rate of 7 tril­lion yen—they pacep pre­dict­edp byy

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.