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”
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