Thursday, 28 June 2018 00:20

BOJ Is Now A Top-10 Shareholder In 40% Of All Japanese Companies; Owns 42% Of All Government Bonds

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The last time we looked at how much of the stock market the Bank of Japan controls, we found that as of September, Kuroda's central bank owned a stunning 75% of all Japanese ETFs as the central bank keeps buying stocks under its ultraloose monetary policy.


Since December 2010 - when The Bank of Japan held no ETFs at all - the central bank has been buying ETFs  (doubling its annual buying target to 6 trillion yen in July 2016) as part of unprecedented economic stimulus. Over this period, the Nikkei 225 Stock Average has risen 89% since December 2010. It is safe to say the two are correlated.

Fast forward to today, when according to the latest BOJ holdings update following even more ETF purchases, the Japanese central bank has also become a major shareholder in nearly 40% of listed companies. According to Nikkei calculations, the bank was one of the top 10 shareholders in 1,446 listed companies out of 3,735 at the end of March.

This means that just over the past year, when the BOJ was a major owner of 833 stocks, the BOJ's equity holdings have expanded by a staggering 70%. In addition, the Central Bank bank is now the top shareholder in Tokyo Dome, Sapporo Holdings, Unitika, Nippon Sheet Glass and Aeon.

This means that the BOJ has amassed an estimated 25 trillion yen ($227 billion) of equities as a result of purchasing exchange-traded funds. Putting these holdings in context, the BOJ holdings are equal to nearly 4% of the roughly 652 trillion yen aggregate market value of stocks traded on the first section of the Tokyo Stock Exchange.

In justifying the BOJ's relentless takeover of the stock market, Kuroda has said that buying up stocks is an integral part of the BOJ's strategy to lift inflation to 2%, a program which "has fulfilled its role to a certain extent," according to Kuroda. But, as the Nikkei adds, the size of the buying spree could complicate an eventual exit strategy from the monetary easing and also distort basic market mechanisms.

Some have said, half-jokingly, that there will never be an "exit", as the mere hint that the BOJ would taper, or worse sell, its ETF activity and holdings, would lead to a historic selloff as everyone rushes for the exits.

What about bonds? In the same update, the BOJ reported that it now also holds a record 41.8% of all Japanese bonds, an amount roughly equivalent to Japan's entire GDP.


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