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Bank of Japan Is an Estimated Top 10 Holder in 90% of the Nikkei 225

201 points by randomname2 10y ago

toomuchtodo 10y ago
Let's not write off this extreme form of QE if Japan can keep its quality of life high at the same time.
- technocodes 10y ago
  That's a little short sighted dont you think?
  - toomuchtodo 10y ago
    How so? Japan's been trying for decades to stoke growth, is unable to, and has (IMHO) a pretty high standard of living. Correct me? Abenomics is fairly recent, but you can't create demand in a country with a declining population. EDIT: Stop optimizing for GDP. Optimize for quality of life.
    - technocodes 10y ago
      This works in the short run, but the Japanese have been in an economic hole for a long time. They are printing money to keep assets afloat, but this wont work forever and they know it. The whole thing is fake, and fake doenst last forever.
      - toomuchtodo 10y ago
        It's lasted what, 20 years so far? You say it won't work forever; we can't just reproduce ourselves out of the problem (by encouraging policies the promote couples to have more children). At some point, we will decide growth is over and isn't coming back. It feels like we're close to that point. And good! You can have a great quality of life without neverending growth.
- hashberry 10y ago
  Quality of life? Japan's poverty level is at record highs.[0] "Bookshops advertise a slew of bestsellers on how to survive on an annual income of under ¥2m ($16,700), a poverty line below which millions of Japanese now live." [0]http://www.economist.com/news/asia/21647676-poverty-worsens-more-japanese-work-non-permanent-contracts-struggling http://www.economist.com/news/asia/21647676-poverty-worsens-...
  - HillaryBriss 10y ago
    The thing about this is that national poverty statistics don't tell the whole story. They just offer a rough summary. Things really are different in Japan, even in the impoverished parts. From the same Economist article: "The country has long prided itself on ensuring that none of its citizens falls between the social cracks. Japan’s orderly, slum-free neighbourhoods seem to confirm that. Street crime, even in Kotobuki, is minuscule. Unemployment is below 4% ... " Compare that to the "choice parts" of downtown Los Angeles or the Tenderloin in SF. Despite many decades of fighting poverty, many many people still fall through the holes in the US social safety nets. Japan also builds better cars.
    - toomuchtodo 10y ago
      This hits the nail on the head. As a US citizen who has lived in the US for 32 years, I'd rather live in poverty in Japan than middle class in LA, SF, or NYC.
TheLogothete 10y ago
What's up with titles on HN? Are you guys doing this on purpose? >the monetary authority’s exchange-traded fund purchases have made it a top 10 shareholder in about 90 percent of the Nikkei 225 Stock Average
- alex_duf 10y ago
  I have: > The Tokyo Whale Is Quietly Buying Up Huge Stakes in Japan Inc. So I guess bloomberg is A/B testing their titles
- spyspy 10y ago
  Not sure why you're being downvoted. BofJ does not hold 90% of Japanese stocks, just 90% of stocks in the Nikkei 225 index. Still interesting but very misleading title.
  - lotharbot 10y ago
    it's not even that they hold 90% of stocks in the Nikkei 225. It's that among 90% of the stocks in the Nikkei 225 (about 203 stocks), the BoJ is one of the top-10 stockholders. Typically with large US stocks, the top 10 stockholders hold about 1-6% [0] -- so that implies, if the countries are substantially similar, that the BofJ holds 1-6% of 90% of Nikkei 225 stocks, or about 0.9-5% of total stocks in the Nikkei 225. [0] http://finance.yahoo.com/q/mh?s=CSCO&ql=1 http://finance.yahoo.com/q/mh?s=CSCO&ql=1 -- type in any large stock you can think of; you'll probably see Vanguard, T.Rowe Price, State Street, and a couple of other investment firms in the 1-6% range.
mc32 10y ago
It's almost working out as a very slow nationalization process -which is not what the Boj is looking for, so what's the endgame if they do end up controlling sizable shares in companies? More or less of the concrete-industrial-retirement complex?
- rm_-rf_slash 10y ago
  Japan has a lot of leading industries and a social contract that depends on conglomerate careers for life. Nationalistic mercantilism makes enormous sense in Japan.
  - mc32 10y ago
    It sort of does, if it worked more disinterestedly, however the way it works grossly mismanages resources and is rife with corruption and you end up with the concretization and tetrapodization of the shorelines and community centers in the middle of nowhere. They could use these monies much more smartly.
    - rm_-rf_slash 10y ago
      Yeah, that tends to be the downside of a management structure that almost universally favors seniority over merit.
    - yourapostasy 10y ago
      > the concretization and tetrapodization of the shorelines and community centers in the middle of nowhere I couldn't find a definition for "tetrapodization" in an economic or urban planning context (one of the top Google hits is your post), can you please offer a link that describes this effect upon the shorelines and community centers you speak of?
      - krapp 10y ago
        "tetrapodization" probably refers to the large concrete "tetrapods" piled up along Japan's shorelines as a preventative measure against erosion. Google "japan tetrapod' and you can find a lot of references - here is a Pink Tentacle article with a lot of pictures[0], and another article describing them and their history.[1] [0]http://pinktentacle.com/2008/08/photos-tetrapod-beaches-of-japan/ http://pinktentacle.com/2008/08/photos-tetrapod-beaches-of-j... [1]http://www.mikesblender.com/tokyo_concretecoast.php http://www.mikesblender.com/tokyo_concretecoast.php
chollida1 10y ago
The biggest issue with this is that it distorts the market in a way that normal quantitative easing doesn't. Normally the stock market prices are kept in check with short sellers putting downward pressure on stocks that are priced too high. With the government buying so much, being long only, it makes it very hard for a fund to short a stock. Its one thing to be right, but its another to try and short a stock knowing that you've got the government taking the other side of your trade. It doesn't matter what fund you are, they have more firepower than you, which leads to decrease in short interest, which leads to an overall inflation in market values that goes away the moment the markets get any hint that the government will stop propping up prices. Or put another way, the government is now in a position where they'll need to keep on buying and holding the stock market forever. Nothing about the Japanese stock market surprises me anymore. Below is a good article illustrating how one leveraged ETF got so big that it was literally moving the market at the end of ht day in its attempt to re balance itself. Sort of a tail wagging the dog scenario. http://www.bloomberg.com/news/articles/2015-10-18/the-etf-whale-blamed-for-moving-japanese-markets-gets-reeled-in http://www.bloomberg.com/news/articles/2015-10-18/the-etf-wh... I guess the one good thing about Japan is that its essentially a petri dish for maco economists and macro funds to experiment with to determine what the US markets will look like if/when the US hits an end to its economic growth.
- xiphias 10y ago
  QE and the banks buying stocks is the same thing: QE helps banks loan money extremely cheap which they can use to long the stock market.
  - MichaelApproved 10y ago
    Aren't they free to do what they like with that cheap money? They can short the stock market as well as many other things. There's no requirement to long the market. OP is saying the govt only buys which keeps underpinning the market higher. On the other hand QE allows the market forces to do what it likes with the cash which will more easily balance.
    - 10y ago
m52go 10y ago
What's the end-game here? Obviously their sovereign debt level is enormous too, but it's also mostly purchased by the Bank of Japan. It's a ponzi scheme that's contained within itself. So it must mean Japan is heading toward a currency collapse, correct? They're not going to default on their own debt since they own it all and can print whatever they need to keep it serviced. It seems to me that the markets will one day wake up and decide that the yen is worthless...and that will cause ruckus.
- 21 10y ago
  Shorting the yen, meaning betting that the currency will collapse has been an obvious trade for decades. This trade is also called the widowmaker :) There is a long trail of bodies in it's wake... As always, timing is everything. http://www.businessinsider.com/japanese-30-year-hits-new-low-2016-3 http://www.businessinsider.com/japanese-30-year-hits-new-low... http://www.bloomberg.com/news/videos/2016-01-14/the-widowmaker-trade http://www.bloomberg.com/news/videos/2016-01-14/the-widowmak...
  - dopamean 10y ago
    I think that's why there's a saying about the market staying irrational longer than you can stay solvent.
    - jsprogrammer 10y ago
      Wouldn't a market always act rationally, by definition?
      - yoha 10y ago
        You are confusing two things. Here are plausible definitions: * market: system for trading assets between willing participants * economics: modeling the behavior of markets assuming rational behavior of participants The definition of markets has nothing to do with rationality.
        10y ago
carsongross 10y ago
We live in a world of extreme subjectiveness. Cash flows are massaged and obfuscated. Dividends aren't paid, we are asked to look, instead, at earnings yield, but not too closely. Non-GAAP earnings are treated as first class citizens. Companies borrow money against themselves to buy back their own stock, in a self-referential spiral. Meanwhile, governments shamelessly intervene in the markets, to keep the (increasingly subjective) prices high and the (objective) realized cash flow rate (dividends) low. What is the value of any cash flow, with a 0% interest rate? With a negative one? What is truth? These are the crazy days.
- chatmasta 10y ago
  We all die sometime, we just gotta keep kicking the can down the road until it turns into a bucket!
  - toomuchtodo 10y ago
    Permission to steal this? :)
    - chatmasta 10y ago
      Haha, sure. Probably one of my proudest puns I've come up with. I posted it on r/showerthoughts one time and got zero upvotes.... think it goes over a lot of heads. :P
      - philovivero 10y ago
        What sort of epigenetic expression must there be for the can to suddenly turn into a bucket? And what does this mean to cancer research?
franze 10y ago
SPOF
liquidise 10y ago
Can we please update this wildly sensational title? BoJ is a top 10 holder in 90% of Nikkei 225 stocks. That is 90% of 226 stocks [1], or, 203 in total. The article states this clearly before the opening paragraph. 1. https://en.wikipedia.org/wiki/Nikkei_225#Components https://en.wikipedia.org/wiki/Nikkei_225#Components
wheaties 10y ago
What bothers me more than anything outside of the conflation of "assets" such as stocks and bonds as indicators of actual economic "growth" is that they are placing an inter-generational bet: They are using money today which must be paid back tomorrow. The people who stand most to benefit are adults today. The people who stand most to lose are their children's children.
- RobertoG 10y ago
  "They are using money today which must be paid back tomorrow." That reasoning doesn't support examination. The adults of today use the real resources of the economy of today. The adults of 50 years from now, will use the resources of the economy of their time. If we are worried about the people of the future, we will try to create real resources (knowledge and technology specially) that they can use, and we will worry less about debt. In fact, we should be using debt to create those resources as fast as possible.
  - nugget 10y ago
    In your description a debt created in return for consumption today and honored in the future is like a wormhole in space-time. Unlike iron or steel, personal labor is a real resource capable of time travel. A psychiatrist can work 40 hours or 80 hours this week. Presumably society is better off if he works 80, so we promise him more money (future demand) in return for his services now (supply pulled forward, especially if he retires earlier than he otherwise would). In theory, as you imply, future generations are better off since you have "accelerated" economic development which is usually net positive. In reality, taken to the extreme, you wake up one day and find that you have been born into a world of neonatal debt slavery to retired psychiatrists who you never met and (especially without population growth) the entire system collapses and reboots. This describes Japan: a country with 300% debt to GDP and flat to declining population, where babies are born into a headwind of sovereign debt.
    - RobertoG 10y ago
      You complicate the issue too much. What would you prefer, to live in a Somalia with 0% public debt or in a Japan with 300% public debt? And why? Because in one there is real infrastructure and knowledge and the other not so much. Or if we want to go all science fiction. In what future do you prefer to live? One with economic fusion, artificial intelligence, and robots that do the entire job but a 300% debt or a future of 0% debt and less technology or infrastructure that today. Debt is a political arrangement and organizational issue. Real wealth comes, surprise, from real wealth.
calebgilbert 10y ago
If nations want to nationalize their stock market it's good monetary policy. If nations want to nationalize healthcare it's an improper manipulation of free markets. Simplification of above statements: $good = "logical monetary policy"; $bad = "pinkie commie manipulation of free markets"; if ($policy leads to higher prices for my portfolio) { $good } else { $bad }
- unknown_apostle 10y ago
  Totally correct. The intention is to serve the general interest (through Keynesian reasoning), but its immediate effect is to quite literally implement "socialism for the rich". You may call it capitalism, but it sure has nothing to do with free markets.
- cloudjacker 10y ago
  No thats only a valid criticism of the US debates
  - deleted 10y ago
    [deleted]
  - dmix 10y ago
    Indeed, almost every other western country has socialized healthcare. The US is only 300 million of them with particularly loud voices... and despite all of the rhetoric, they have even deeper pockets to pay for healthcare than most states with comparable tax regimes.
    - WildUtah 10y ago
      France, Japan, Germany, Spain, Canada, and Mexico don't have socialized health care. Of the western countries, it's mostly just Britain that has socialized health care. Now a lot of those countries have universal access to health care. In fact, all of them do. Every developed nation except the USA does. But only one major western nation does to health care what the Bank of Japan is doing to its stock market.
poof131 10y ago
This is ridiculous. It illustrates that most central banks’ primary mission has become asset price inflation (primarily the stock market) more than anything else. Pension funds, retirement savings, the top 1%’s majority of assets, and so on are all in the market so governments of the world have decided that the market shouldn’t go down, at least not very much. So we are stuck at zero percent interest rates going negative. Give out the money to keep the party going. Any hiccup in the markets and banks cut rates. Our economies will continue to struggle with malinvestments until interest rates are in a more reasonable long-term range and all the zombie businesses can die and free up resources for stronger players. Amazing how supposed proponents of ‘free markets’ try to micromanage entire economies.
- msellout 10y ago
  The government does have a responsibility to alleviate the pain of economic dislocation. The nation might gain as companies fail and jobs are lost, but individuals are hurt. Unfortunately, the best solutions -- unemployment insurance, free education, free healthcare, or basic income -- are politically unpalatable (for the strange ethics of "fairness"), so we end up with awkward compromises that set us up for catastrophic failures.
- SilasX 10y ago
  > Pension funds, retirement savings, the top 1%’s majority of assets, and so on are all in the market so governments of the world have decided that the market shouldn’t go down, at least not very much. Yeah, that's kind of my worry with the move to long-term wide-spread stock investing for retirement. Ostensibly, that strategy has done well, but once everyone does it, that prods massive political favor toward propping up the largest companies (that are getting this investment).
- sitkack 10y ago
  I also enjoy the side effect of keeping the rate of return for savings accounts at zero.
  - TheCowboy 10y ago
zhte415 10y ago
Central banks are very hesitant at being seen as a market maker, except in money markets. The article mentions these are being held as ETFs. In addition, the future liabilities the central bank holds should be written-off against current assets vs. future tax income required to fund these liabilities.
deleted 10y ago
[deleted]
tim333 10y ago
Seems pretty sensible policy to me. The expected return on the stocks if probably something like 7%. The government can borrow at about 0%. Why not borrow and buy stocks? I would if I could borrow in that way. Also it helps the economy - win all round.
hudibras 10y ago
At an estimated 8.6 trillion yen as of March, the BOJ’s holdings amount to about 1.6 percent of the total capitalization of all companies listed in Japan. That compares with about 5 percent held by the nation’s Government Pension Investment Fund. The central bank’s use of large-cap ETFs means its positions are concentrated, with less impact on the thousands of Japanese companies outside benchmark indexes. Some additional context, from the article. This is not really a big deal. Unusual, but not crazy.
randomname2 10y ago
This news follows the recent disclosure that the BOJ is already an owner of 52%+ of all Japanese ETFs (and wants to own more). [1] The BoJ is not the only central bank doing such purchases -- the Swiss National Bank similarly owns over $100B in equities. [2] In addition, central banks actively trade S&P 500 futures on Globex. [3] [1] http://asia.nikkei.com/Markets/Tokyo-Market/BOJs-stock-portfolio-swells-to-10-trillion-yen http://asia.nikkei.com/Markets/Tokyo-Market/BOJs-stock-portf... [2] http://www.streetinsider.com/SEC+Filings/Form+13F-HR+Swiss+National+Bank+For%3A+Dec+31/11274927.html http://www.streetinsider.com/SEC+Filings/Form+13F-HR+Swiss+N... [3] https://www.cmegroup.com/company/membership/files/CBIPFAQ.pdf https://www.cmegroup.com/company/membership/files/CBIPFAQ.pd...
- spooz_trader 10y ago
  In regards to #3 & the central bank incentive structure.. I've seen this behavior for quite sometime. Really since QE3 started. I'm an S&P futures trader that trades many many thousands of contracts every single year & hundreds per day based on real-time order flow. There is an algo that was introduced around QE3 that I have made a tremendous amount of money front running that I have called the "Fed bot". Obviously, this is anecdotal & I have no proof but this bot only ever trades in one direction... long. It has a clear & obvious fingerprint in the market when it is activated & absorbs a huge amount of inventory followed by market order offer sweeps. Often times on an intraday pattern with a "V" shape where a bottom was put in is when I see this algo active. Admittedly, I've not seen it much in 2016 but it has not gone extinct. Typically when volatility is lower is when I see it in action & it's so obvious that I could show it to anybody watching in real-time. It never seems to desire a "best price" type of fill, rather its intentions seem to be more like having a direct impact on the pricing mechanism of the market. That is evident by the sweeping market orders clearing out the offers resting in the order book & immediately moving up liquidity on the bid to those new prices. Could be conspiracy theory but I've been trading electronically for a long time in a lot of markets & the S&P since QE3 has a new long only player that has me suspicious.
- cloudjacker 10y ago
  Don't forget the European Central Bank! They are officially buying corporate bonds!
DonFromWyoming 10y ago
It's called socialism folks. Government ownership of the means of production. Full stop.
mark_l_watson 10y ago
I wonder if in the future we will look back on history and understand that what is happening with Japan is just a natural result of transitioning to a no-growth economy. In the USA, everything is set up to require growth, or we get collapse. Except for family owned businesses that tend to take a long term view and also modern decentralized 'limited profit' companies (even better if their charters use blockchain tech), all big business requires growth as does our government. I know I am asking for a lot, but I would like to see a non-growth (or cyclical growth) mindset become the new normal. This would require new ideas about currency, the benefits of small local businesses over global businesses, etc.
- ihsw 10y ago
  Well, it's hard to argue that this is non-growth rather than negative-growth masquerading as non-growth. There is a very strong argument that many corps in Japan should've given way to market forces and died out, but they are instead kept on life-support as a form of social welfare. One has to wonder what the rationale for all of this is -- what are they afraid of? If they are suddenly left to their own devices, are these people going to starve to death? Has no-one ever been faced with the prospect of having to find a new job? Many nations on Earth are being confronted with the notion that larger and larger sections of their society are now unemployable, and they are all handling it differently. Japan seems to have been confronted with this sooner than anybody else and they are choosing to keep their businesses afloat under the assumption that they will not institute deep and painful budget cuts, specifically slashing the employment workforce. And it looks like Japanese corps are cooperating.
  - TheOtherHobbes 10y ago
    It's ironically Keynesian only without the potential benefits, because most of the money is lost on play acting make-work and not on productive activity. Even more ironically, it's practically nationalisation by the back door. >Many nations on Earth are being confronted with the notion that larger and larger sections of their society are now unemployable People are not unemployable. The problem is more that the current system isn't smart enough to work out how they can be usefully employed. Every country in the world has a huge amount of work that could be done - infrastructure improvement, education, housing improvement, art and culture, even software and startups. But the current value system deems most of these activities "uneconomic" because funding them would decrease the short-term net worth of a small number of very wealthy individuals. It's a nonsense reason, but it's going to be a problem until the value system becomes intelligent enough to plan rationally for the medium and long term.
justsaysmthng 10y ago
Meta comment / rant about the bloomberg website. What's the matter with these web sites these days ? When did everyone decide that good old scrolling is too old fashioned, so now the simple act of swiping the mouse to scroll down, results in totally surprising and confusing consequences - such as resizing and moving the video, pausing it if I scroll too much and then restarting it if I scroll back up.. Scrollbar position ? Ignore that - it tells you absolutely nothing - because there is the mega cool "infinite scrolling" feature ! Which by the way replaces current video with another one, which starts buffering and playback starts only later, when I've scrolled away or switched tabs.. And of course there's the unscrollable, unremovable top header - a sort of screen real estate tax you have to pay for the "bloomberg" logo and .. Surprise ! A horizontal scrollbar showing the vertical position in current article ! What a mess ... Sorry for the rant, but I'm sure I'm not alone in my 'suffering' and this is a trend I've noticed on many websites, since they copy each other anyway... /Rant
- yoha 10y ago
  I browse with Javascript disabled by default (NoScript), and it makes it much less painful. Although there is the odd case of a completely broken design that even Firefox Reader cannot detect, it does save me many other issues, and makes everything load much faster!
  - dmix 10y ago
    uBlock origin in advanced mode is good for this. So you can toggle certain primary JS scripts to get some sites functional. Then saving the setup for future use. Over time you get to the point where 99% of sites are fully usable while still blocking the vast majority of JS.
    - redtuesday 10y ago
      NoScript can do this too. You have the choice to activate certain scripts permanently (of course you can deactivate them later again if you want), or you can even activate them only for the current session and the next time you start the browser the temporary activated scripts are blocked again.
fiatmoney 10y ago
How is this economically distinct from broad ownership of passively-managed stock index funds?
grillvogel 10y ago
the economic system of Japan is very different than in the US/Europe, I find the east asian capitalism style preferable to what we have here.
- dmix 10y ago
  You prefer supporting zombie companies and forcing your young creative class away from being able to create disruptive startups in favour of being a corporate cog [1] in the machine? That is the life in Japan. It's not just a fear of failure preventing a thriving entrepreneurial class from existing there. It's their economic policy. [1] https://www.youtube.com/watch?v=otWl3Zu1Mr4 https://www.youtube.com/watch?v=otWl3Zu1Mr4
  - grillvogel 10y ago
    I like the way that Japan is. I don't care about disruptive startups, and if you think japan needs or wants "disruption" you clearly don't get it at all. I like green tea that is made by a 300 year old company. Have you actually been there or just watched stupid videos on the internet?
    - dmix 10y ago
      Fair enough, if they can stay in business. The question is sustainability. Old institutions often reach points where failure, or nearing failure, is the only way forward. So it can be rebuilt into something better. I see issues with the hyper speed that SV businesses have taken this to the extreme but it's the middle ground that is healthy. The other extreme creates the situation where always having a safety-net no matter what negative downward problems or risks a company is taking creates dangerous moral hazards [1] which compound on each other over time to create unavoidable economic crises, as Wall st generated in 2008. If you think the Japanese are immune to these moral hazards then you are denying some core principles in human behavioural science. Japan's core industry seems to be suffering a chronic illness which it's continually trying to medicate instead of moving on and confronting the future. Kicking the can down the road, as others have mentioned. Zombie companies are just the obvious symptom as this dysfunction bubbles to the surface. Reality will come to bare eventually, it has to, economies cannot remain disconnected from their own tangible output forever. The apparent stubbornness of Japanese culture to maintain the status quo will likely mean it will be the children of the current generation that will be the ones left to pick up the pieces, so you can keep drinking your tea no doubt. [1] https://en.wikipedia.org/wiki/Moral_hazard https://en.wikipedia.org/wiki/Moral_hazard
josephlord 10y ago
This is the way Europe and the US are going too with quantitive easing it is just that Japan is a couple of decades ahead. We need proper helicopter money (or a Modern Jubilee) going to the public to spend not to purchase assets at the benefit of existing asset holders. http://www.debtdeflation.com/blogs/manifesto/ http://www.debtdeflation.com/blogs/manifesto/ See - "A Modern Jubilee" (I'm not sure about the Jubilee Shares part though).
ww520 10y ago
This shows the need for basic income. Now the central banks are geared toward giving money to the Have's, the people owning assets, by popping up the asset price one way or the other. Since the money need to be printed anyway, might as well give it directly to ALL of the people. At least the money will be spent to drive the economy. Printing money to pop up asset price just locks up the money in the asset and won't be used.

201 points by randomname2 10y ago

toomuchtodo 10y ago

Let's not write off this extreme form of QE if Japan can keep its quality of life high at the same time.

technocodes 10y ago
That's a little short sighted dont you think?
- toomuchtodo 10y ago
  How so? Japan's been trying for decades to stoke growth, is unable to, and has (IMHO) a pretty high standard of living. Correct me? Abenomics is fairly recent, but you can't create demand in a country with a declining population. EDIT: Stop optimizing for GDP. Optimize for quality of life.
  - technocodes 10y ago
    This works in the short run, but the Japanese have been in an economic hole for a long time. They are printing money to keep assets afloat, but this wont work forever and they know it. The whole thing is fake, and fake doenst last forever.
    - toomuchtodo 10y ago
      It's lasted what, 20 years so far? You say it won't work forever; we can't just reproduce ourselves out of the problem (by encouraging policies the promote couples to have more children). At some point, we will decide growth is over and isn't coming back. It feels like we're close to that point. And good! You can have a great quality of life without neverending growth.
hashberry 10y ago
Quality of life? Japan's poverty level is at record highs.[0] "Bookshops advertise a slew of bestsellers on how to survive on an annual income of under ¥2m ($16,700), a poverty line below which millions of Japanese now live." [0]http://www.economist.com/news/asia/21647676-poverty-worsens-more-japanese-work-non-permanent-contracts-struggling http://www.economist.com/news/asia/21647676-poverty-worsens-...
- HillaryBriss 10y ago
  The thing about this is that national poverty statistics don't tell the whole story. They just offer a rough summary. Things really are different in Japan, even in the impoverished parts. From the same Economist article: "The country has long prided itself on ensuring that none of its citizens falls between the social cracks. Japan’s orderly, slum-free neighbourhoods seem to confirm that. Street crime, even in Kotobuki, is minuscule. Unemployment is below 4% ... " Compare that to the "choice parts" of downtown Los Angeles or the Tenderloin in SF. Despite many decades of fighting poverty, many many people still fall through the holes in the US social safety nets. Japan also builds better cars.
  - toomuchtodo 10y ago
    This hits the nail on the head. As a US citizen who has lived in the US for 32 years, I'd rather live in poverty in Japan than middle class in LA, SF, or NYC.

TheLogothete 10y ago

What's up with titles on HN? Are you guys doing this on purpose? >the monetary authority’s exchange-traded fund purchases have made it a top 10 shareholder in about 90 percent of the Nikkei 225 Stock Average

alex_duf 10y ago
I have: > The Tokyo Whale Is Quietly Buying Up Huge Stakes in Japan Inc. So I guess bloomberg is A/B testing their titles
spyspy 10y ago
Not sure why you're being downvoted. BofJ does not hold 90% of Japanese stocks, just 90% of stocks in the Nikkei 225 index. Still interesting but very misleading title.
- lotharbot 10y ago
  it's not even that they hold 90% of stocks in the Nikkei 225. It's that among 90% of the stocks in the Nikkei 225 (about 203 stocks), the BoJ is one of the top-10 stockholders. Typically with large US stocks, the top 10 stockholders hold about 1-6% [0] -- so that implies, if the countries are substantially similar, that the BofJ holds 1-6% of 90% of Nikkei 225 stocks, or about 0.9-5% of total stocks in the Nikkei 225. [0] http://finance.yahoo.com/q/mh?s=CSCO&ql=1 http://finance.yahoo.com/q/mh?s=CSCO&ql=1 -- type in any large stock you can think of; you'll probably see Vanguard, T.Rowe Price, State Street, and a couple of other investment firms in the 1-6% range.

mc32 10y ago

It's almost working out as a very slow nationalization process -which is not what the Boj is looking for, so what's the endgame if they do end up controlling sizable shares in companies? More or less of the concrete-industrial-retirement complex?

rm_-rf_slash 10y ago
Japan has a lot of leading industries and a social contract that depends on conglomerate careers for life. Nationalistic mercantilism makes enormous sense in Japan.
- mc32 10y ago
  It sort of does, if it worked more disinterestedly, however the way it works grossly mismanages resources and is rife with corruption and you end up with the concretization and tetrapodization of the shorelines and community centers in the middle of nowhere. They could use these monies much more smartly.
  - rm_-rf_slash 10y ago
    Yeah, that tends to be the downside of a management structure that almost universally favors seniority over merit.
  - yourapostasy 10y ago
    > the concretization and tetrapodization of the shorelines and community centers in the middle of nowhere I couldn't find a definition for "tetrapodization" in an economic or urban planning context (one of the top Google hits is your post), can you please offer a link that describes this effect upon the shorelines and community centers you speak of?
    - krapp 10y ago
      "tetrapodization" probably refers to the large concrete "tetrapods" piled up along Japan's shorelines as a preventative measure against erosion. Google "japan tetrapod' and you can find a lot of references - here is a Pink Tentacle article with a lot of pictures[0], and another article describing them and their history.[1] [0]http://pinktentacle.com/2008/08/photos-tetrapod-beaches-of-japan/ http://pinktentacle.com/2008/08/photos-tetrapod-beaches-of-j... [1]http://www.mikesblender.com/tokyo_concretecoast.php http://www.mikesblender.com/tokyo_concretecoast.php

chollida1 10y ago

The biggest issue with this is that it distorts the market in a way that normal quantitative easing doesn't. Normally the stock market prices are kept in check with short sellers putting downward pressure on stocks that are priced too high. With the government buying so much, being long only, it makes it very hard for a fund to short a stock. Its one thing to be right, but its another to try and short a stock knowing that you've got the government taking the other side of your trade. It doesn't matter what fund you are, they have more firepower than you, which leads to decrease in short interest, which leads to an overall inflation in market values that goes away the moment the markets get any hint that the government will stop propping up prices. Or put another way, the government is now in a position where they'll need to keep on buying and holding the stock market forever. Nothing about the Japanese stock market surprises me anymore. Below is a good article illustrating how one leveraged ETF got so big that it was literally moving the market at the end of ht day in its attempt to re balance itself. Sort of a tail wagging the dog scenario. http://www.bloomberg.com/news/articles/2015-10-18/the-etf-whale-blamed-for-moving-japanese-markets-gets-reeled-in http://www.bloomberg.com/news/articles/2015-10-18/the-etf-wh... I guess the one good thing about Japan is that its essentially a petri dish for maco economists and macro funds to experiment with to determine what the US markets will look like if/when the US hits an end to its economic growth.

xiphias 10y ago
QE and the banks buying stocks is the same thing: QE helps banks loan money extremely cheap which they can use to long the stock market.
- MichaelApproved 10y ago
  Aren't they free to do what they like with that cheap money? They can short the stock market as well as many other things. There's no requirement to long the market. OP is saying the govt only buys which keeps underpinning the market higher. On the other hand QE allows the market forces to do what it likes with the cash which will more easily balance.
  - 10y ago

m52go 10y ago

What's the end-game here? Obviously their sovereign debt level is enormous too, but it's also mostly purchased by the Bank of Japan. It's a ponzi scheme that's contained within itself. So it must mean Japan is heading toward a currency collapse, correct? They're not going to default on their own debt since they own it all and can print whatever they need to keep it serviced. It seems to me that the markets will one day wake up and decide that the yen is worthless...and that will cause ruckus.

21 10y ago
Shorting the yen, meaning betting that the currency will collapse has been an obvious trade for decades. This trade is also called the widowmaker :) There is a long trail of bodies in it's wake... As always, timing is everything. http://www.businessinsider.com/japanese-30-year-hits-new-low-2016-3 http://www.businessinsider.com/japanese-30-year-hits-new-low... http://www.bloomberg.com/news/videos/2016-01-14/the-widowmaker-trade http://www.bloomberg.com/news/videos/2016-01-14/the-widowmak...
- dopamean 10y ago
  I think that's why there's a saying about the market staying irrational longer than you can stay solvent.
  - jsprogrammer 10y ago
    Wouldn't a market always act rationally, by definition?
    - yoha 10y ago
      You are confusing two things. Here are plausible definitions: * market: system for trading assets between willing participants * economics: modeling the behavior of markets assuming rational behavior of participants The definition of markets has nothing to do with rationality.
      - 10y ago

carsongross 10y ago

We live in a world of extreme subjectiveness. Cash flows are massaged and obfuscated. Dividends aren't paid, we are asked to look, instead, at earnings yield, but not too closely. Non-GAAP earnings are treated as first class citizens. Companies borrow money against themselves to buy back their own stock, in a self-referential spiral. Meanwhile, governments shamelessly intervene in the markets, to keep the (increasingly subjective) prices high and the (objective) realized cash flow rate (dividends) low. What is the value of any cash flow, with a 0% interest rate? With a negative one? What is truth? These are the crazy days.

chatmasta 10y ago
We all die sometime, we just gotta keep kicking the can down the road until it turns into a bucket!
- toomuchtodo 10y ago
  Permission to steal this? :)
  - chatmasta 10y ago
    Haha, sure. Probably one of my proudest puns I've come up with. I posted it on r/showerthoughts one time and got zero upvotes.... think it goes over a lot of heads. :P
    - philovivero 10y ago
      What sort of epigenetic expression must there be for the can to suddenly turn into a bucket? And what does this mean to cancer research?

franze 10y ago

SPOF

liquidise 10y ago

Can we please update this wildly sensational title? BoJ is a top 10 holder in 90% of Nikkei 225 stocks. That is 90% of 226 stocks [1], or, 203 in total. The article states this clearly before the opening paragraph. 1. https://en.wikipedia.org/wiki/Nikkei_225#Components https://en.wikipedia.org/wiki/Nikkei_225#Components

wheaties 10y ago

What bothers me more than anything outside of the conflation of "assets" such as stocks and bonds as indicators of actual economic "growth" is that they are placing an inter-generational bet: They are using money today which must be paid back tomorrow. The people who stand most to benefit are adults today. The people who stand most to lose are their children's children.

RobertoG 10y ago
"They are using money today which must be paid back tomorrow." That reasoning doesn't support examination. The adults of today use the real resources of the economy of today. The adults of 50 years from now, will use the resources of the economy of their time. If we are worried about the people of the future, we will try to create real resources (knowledge and technology specially) that they can use, and we will worry less about debt. In fact, we should be using debt to create those resources as fast as possible.
- nugget 10y ago
  In your description a debt created in return for consumption today and honored in the future is like a wormhole in space-time. Unlike iron or steel, personal labor is a real resource capable of time travel. A psychiatrist can work 40 hours or 80 hours this week. Presumably society is better off if he works 80, so we promise him more money (future demand) in return for his services now (supply pulled forward, especially if he retires earlier than he otherwise would). In theory, as you imply, future generations are better off since you have "accelerated" economic development which is usually net positive. In reality, taken to the extreme, you wake up one day and find that you have been born into a world of neonatal debt slavery to retired psychiatrists who you never met and (especially without population growth) the entire system collapses and reboots. This describes Japan: a country with 300% debt to GDP and flat to declining population, where babies are born into a headwind of sovereign debt.
  - RobertoG 10y ago
    You complicate the issue too much. What would you prefer, to live in a Somalia with 0% public debt or in a Japan with 300% public debt? And why? Because in one there is real infrastructure and knowledge and the other not so much. Or if we want to go all science fiction. In what future do you prefer to live? One with economic fusion, artificial intelligence, and robots that do the entire job but a 300% debt or a future of 0% debt and less technology or infrastructure that today. Debt is a political arrangement and organizational issue. Real wealth comes, surprise, from real wealth.

calebgilbert 10y ago

If nations want to nationalize their stock market it's good monetary policy. If nations want to nationalize healthcare it's an improper manipulation of free markets. Simplification of above statements: $good = "logical monetary policy"; $bad = "pinkie commie manipulation of free markets"; if ($policy leads to higher prices for my portfolio) { $good } else { $bad }

unknown_apostle 10y ago
Totally correct. The intention is to serve the general interest (through Keynesian reasoning), but its immediate effect is to quite literally implement "socialism for the rich". You may call it capitalism, but it sure has nothing to do with free markets.
cloudjacker 10y ago
No thats only a valid criticism of the US debates
- deleted 10y ago
  [deleted]
- dmix 10y ago
  Indeed, almost every other western country has socialized healthcare. The US is only 300 million of them with particularly loud voices... and despite all of the rhetoric, they have even deeper pockets to pay for healthcare than most states with comparable tax regimes.
  - WildUtah 10y ago
    France, Japan, Germany, Spain, Canada, and Mexico don't have socialized health care. Of the western countries, it's mostly just Britain that has socialized health care. Now a lot of those countries have universal access to health care. In fact, all of them do. Every developed nation except the USA does. But only one major western nation does to health care what the Bank of Japan is doing to its stock market.

poof131 10y ago

This is ridiculous. It illustrates that most central banks’ primary mission has become asset price inflation (primarily the stock market) more than anything else. Pension funds, retirement savings, the top 1%’s majority of assets, and so on are all in the market so governments of the world have decided that the market shouldn’t go down, at least not very much. So we are stuck at zero percent interest rates going negative. Give out the money to keep the party going. Any hiccup in the markets and banks cut rates. Our economies will continue to struggle with malinvestments until interest rates are in a more reasonable long-term range and all the zombie businesses can die and free up resources for stronger players. Amazing how supposed proponents of ‘free markets’ try to micromanage entire economies.

msellout 10y ago
The government does have a responsibility to alleviate the pain of economic dislocation. The nation might gain as companies fail and jobs are lost, but individuals are hurt. Unfortunately, the best solutions -- unemployment insurance, free education, free healthcare, or basic income -- are politically unpalatable (for the strange ethics of "fairness"), so we end up with awkward compromises that set us up for catastrophic failures.
SilasX 10y ago
> Pension funds, retirement savings, the top 1%’s majority of assets, and so on are all in the market so governments of the world have decided that the market shouldn’t go down, at least not very much. Yeah, that's kind of my worry with the move to long-term wide-spread stock investing for retirement. Ostensibly, that strategy has done well, but once everyone does it, that prods massive political favor toward propping up the largest companies (that are getting this investment).
sitkack 10y ago
I also enjoy the side effect of keeping the rate of return for savings accounts at zero.
- TheCowboy 10y ago

zhte415 10y ago

Central banks are very hesitant at being seen as a market maker, except in money markets. The article mentions these are being held as ETFs. In addition, the future liabilities the central bank holds should be written-off against current assets vs. future tax income required to fund these liabilities.

deleted 10y ago

[deleted]

tim333 10y ago

Seems pretty sensible policy to me. The expected return on the stocks if probably something like 7%. The government can borrow at about 0%. Why not borrow and buy stocks? I would if I could borrow in that way. Also it helps the economy - win all round.

hudibras 10y ago

At an estimated 8.6 trillion yen as of March, the BOJ’s holdings amount to about 1.6 percent of the total capitalization of all companies listed in Japan. That compares with about 5 percent held by the nation’s Government Pension Investment Fund. The central bank’s use of large-cap ETFs means its positions are concentrated, with less impact on the thousands of Japanese companies outside benchmark indexes. Some additional context, from the article. This is not really a big deal. Unusual, but not crazy.

randomname2 10y ago

This news follows the recent disclosure that the BOJ is already an owner of 52%+ of all Japanese ETFs (and wants to own more). [1] The BoJ is not the only central bank doing such purchases -- the Swiss National Bank similarly owns over $100B in equities. [2] In addition, central banks actively trade S&P 500 futures on Globex. [3] [1] http://asia.nikkei.com/Markets/Tokyo-Market/BOJs-stock-portfolio-swells-to-10-trillion-yen http://asia.nikkei.com/Markets/Tokyo-Market/BOJs-stock-portf... [2] http://www.streetinsider.com/SEC+Filings/Form+13F-HR+Swiss+National+Bank+For%3A+Dec+31/11274927.html http://www.streetinsider.com/SEC+Filings/Form+13F-HR+Swiss+N... [3] https://www.cmegroup.com/company/membership/files/CBIPFAQ.pdf https://www.cmegroup.com/company/membership/files/CBIPFAQ.pd...

spooz_trader 10y ago
In regards to #3 & the central bank incentive structure.. I've seen this behavior for quite sometime. Really since QE3 started. I'm an S&P futures trader that trades many many thousands of contracts every single year & hundreds per day based on real-time order flow. There is an algo that was introduced around QE3 that I have made a tremendous amount of money front running that I have called the "Fed bot". Obviously, this is anecdotal & I have no proof but this bot only ever trades in one direction... long. It has a clear & obvious fingerprint in the market when it is activated & absorbs a huge amount of inventory followed by market order offer sweeps. Often times on an intraday pattern with a "V" shape where a bottom was put in is when I see this algo active. Admittedly, I've not seen it much in 2016 but it has not gone extinct. Typically when volatility is lower is when I see it in action & it's so obvious that I could show it to anybody watching in real-time. It never seems to desire a "best price" type of fill, rather its intentions seem to be more like having a direct impact on the pricing mechanism of the market. That is evident by the sweeping market orders clearing out the offers resting in the order book & immediately moving up liquidity on the bid to those new prices. Could be conspiracy theory but I've been trading electronically for a long time in a lot of markets & the S&P since QE3 has a new long only player that has me suspicious.
cloudjacker 10y ago
Don't forget the European Central Bank! They are officially buying corporate bonds!

DonFromWyoming 10y ago

It's called socialism folks. Government ownership of the means of production. Full stop.

mark_l_watson 10y ago

I wonder if in the future we will look back on history and understand that what is happening with Japan is just a natural result of transitioning to a no-growth economy. In the USA, everything is set up to require growth, or we get collapse. Except for family owned businesses that tend to take a long term view and also modern decentralized 'limited profit' companies (even better if their charters use blockchain tech), all big business requires growth as does our government. I know I am asking for a lot, but I would like to see a non-growth (or cyclical growth) mindset become the new normal. This would require new ideas about currency, the benefits of small local businesses over global businesses, etc.

ihsw 10y ago
Well, it's hard to argue that this is non-growth rather than negative-growth masquerading as non-growth. There is a very strong argument that many corps in Japan should've given way to market forces and died out, but they are instead kept on life-support as a form of social welfare. One has to wonder what the rationale for all of this is -- what are they afraid of? If they are suddenly left to their own devices, are these people going to starve to death? Has no-one ever been faced with the prospect of having to find a new job? Many nations on Earth are being confronted with the notion that larger and larger sections of their society are now unemployable, and they are all handling it differently. Japan seems to have been confronted with this sooner than anybody else and they are choosing to keep their businesses afloat under the assumption that they will not institute deep and painful budget cuts, specifically slashing the employment workforce. And it looks like Japanese corps are cooperating.
- TheOtherHobbes 10y ago
  It's ironically Keynesian only without the potential benefits, because most of the money is lost on play acting make-work and not on productive activity. Even more ironically, it's practically nationalisation by the back door. >Many nations on Earth are being confronted with the notion that larger and larger sections of their society are now unemployable People are not unemployable. The problem is more that the current system isn't smart enough to work out how they can be usefully employed. Every country in the world has a huge amount of work that could be done - infrastructure improvement, education, housing improvement, art and culture, even software and startups. But the current value system deems most of these activities "uneconomic" because funding them would decrease the short-term net worth of a small number of very wealthy individuals. It's a nonsense reason, but it's going to be a problem until the value system becomes intelligent enough to plan rationally for the medium and long term.

justsaysmthng 10y ago

Meta comment / rant about the bloomberg website. What's the matter with these web sites these days ? When did everyone decide that good old scrolling is too old fashioned, so now the simple act of swiping the mouse to scroll down, results in totally surprising and confusing consequences - such as resizing and moving the video, pausing it if I scroll too much and then restarting it if I scroll back up.. Scrollbar position ? Ignore that - it tells you absolutely nothing - because there is the mega cool "infinite scrolling" feature ! Which by the way replaces current video with another one, which starts buffering and playback starts only later, when I've scrolled away or switched tabs.. And of course there's the unscrollable, unremovable top header - a sort of screen real estate tax you have to pay for the "bloomberg" logo and .. Surprise ! A horizontal scrollbar showing the vertical position in current article ! What a mess ... Sorry for the rant, but I'm sure I'm not alone in my 'suffering' and this is a trend I've noticed on many websites, since they copy each other anyway... /Rant

yoha 10y ago
I browse with Javascript disabled by default (NoScript), and it makes it much less painful. Although there is the odd case of a completely broken design that even Firefox Reader cannot detect, it does save me many other issues, and makes everything load much faster!
- dmix 10y ago
  uBlock origin in advanced mode is good for this. So you can toggle certain primary JS scripts to get some sites functional. Then saving the setup for future use. Over time you get to the point where 99% of sites are fully usable while still blocking the vast majority of JS.
  - redtuesday 10y ago
    NoScript can do this too. You have the choice to activate certain scripts permanently (of course you can deactivate them later again if you want), or you can even activate them only for the current session and the next time you start the browser the temporary activated scripts are blocked again.

fiatmoney 10y ago

How is this economically distinct from broad ownership of passively-managed stock index funds?

grillvogel 10y ago

the economic system of Japan is very different than in the US/Europe, I find the east asian capitalism style preferable to what we have here.

dmix 10y ago
You prefer supporting zombie companies and forcing your young creative class away from being able to create disruptive startups in favour of being a corporate cog [1] in the machine? That is the life in Japan. It's not just a fear of failure preventing a thriving entrepreneurial class from existing there. It's their economic policy. [1] https://www.youtube.com/watch?v=otWl3Zu1Mr4 https://www.youtube.com/watch?v=otWl3Zu1Mr4
- grillvogel 10y ago
  I like the way that Japan is. I don't care about disruptive startups, and if you think japan needs or wants "disruption" you clearly don't get it at all. I like green tea that is made by a 300 year old company. Have you actually been there or just watched stupid videos on the internet?
  - dmix 10y ago
    Fair enough, if they can stay in business. The question is sustainability. Old institutions often reach points where failure, or nearing failure, is the only way forward. So it can be rebuilt into something better. I see issues with the hyper speed that SV businesses have taken this to the extreme but it's the middle ground that is healthy. The other extreme creates the situation where always having a safety-net no matter what negative downward problems or risks a company is taking creates dangerous moral hazards [1] which compound on each other over time to create unavoidable economic crises, as Wall st generated in 2008. If you think the Japanese are immune to these moral hazards then you are denying some core principles in human behavioural science. Japan's core industry seems to be suffering a chronic illness which it's continually trying to medicate instead of moving on and confronting the future. Kicking the can down the road, as others have mentioned. Zombie companies are just the obvious symptom as this dysfunction bubbles to the surface. Reality will come to bare eventually, it has to, economies cannot remain disconnected from their own tangible output forever. The apparent stubbornness of Japanese culture to maintain the status quo will likely mean it will be the children of the current generation that will be the ones left to pick up the pieces, so you can keep drinking your tea no doubt. [1] https://en.wikipedia.org/wiki/Moral_hazard https://en.wikipedia.org/wiki/Moral_hazard

josephlord 10y ago

This is the way Europe and the US are going too with quantitive easing it is just that Japan is a couple of decades ahead. We need proper helicopter money (or a Modern Jubilee) going to the public to spend not to purchase assets at the benefit of existing asset holders. http://www.debtdeflation.com/blogs/manifesto/ http://www.debtdeflation.com/blogs/manifesto/ See - "A Modern Jubilee" (I'm not sure about the Jubilee Shares part though).

ww520 10y ago

This shows the need for basic income. Now the central banks are geared toward giving money to the Have's, the people owning assets, by popping up the asset price one way or the other. Since the money need to be printed anyway, might as well give it directly to ALL of the people. At least the money will be spent to drive the economy. Printing money to pop up asset price just locks up the money in the asset and won't be used.