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The Bank of Japan (BOJ) may soon be the first central bank to own “everything”…
Bloomberg reports the 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).
The 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.
That means it now owns 55% of the entire Japanese ETF market… and it’s just getting started.
Now the BOJ may ramp up to over $55 billion in ETF purchases every year. Estimates show the BOJ becoming the No. 1 shareholder in as many as 90 of the top 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.
The 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…
Bottom line: The 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.
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