Japan fact of the day

Japan’s central bank is set to become the top shareholder of 55 companies in the Nikkei

Here is more.


But did the central bank nationalize any of them yet?

TEPCO would likely be a good candidate.

If the central bank owns it, is it already nationalized?

What does that mean? Will it get the dividends that probably won't ever be paid? Will it, at some point, sell its shares in the companies at a profit? If the BOJ buys the shares on the market, at the prevailing price, how does that make All-Nippon Mousetraps & Garterbelts a more successful company? Will Japanese housewives buy more mouse traps because the BOJ owns more shares? Will the Japanese government have more money to construct bullet trains if the BOJ own 55% of All-Nippon M & G?

Release lots of mice.

Supply and demand and CB's do big things. In the late 1990's, Russia or somebody CB was big-time selling gold and I was (not big-time enough) buying at $250 (gold had been > $800 in 1978) an ounce.

I think (cringe) it means the JCB has been buying Japan stocks/equity securities and "artificially" (the JCB is not a customary and usual market participant) increasing Dai Nippon stock market prices. In the US, the Fed didn't purchase stocks to prop the US stock prices, but over the past seven plus years bought about $4 trillion in MBS and other debt instruments to prop (lower interest rate, higher market value) US debt markets, er, keep rates at near zero. I suppose it's one reason Wall Street gave Trump $19,000 but Hillary $50,000,000.00, and pay her $275,000 a pop for twenty minutes of her vast financial wisdom/even more vast political play.

I don't know how the JCB is legislated. In the US the Federal Reserve Banks are "owned" by member banks, but supervised by the Federal Reserve Board in Washington, DC, which sets monetary policy and is supposed to be apolitical, except when they decide certain candidates need to win elections.

So an awful lot of shareholders in Japanese companies would rather have cash that yields nothing than shares that yield, presumably, something.

Maybe because they are old and money can pay for food, but shares in TEPCO won't buy food.

When all the boomers who actually have retirement funds invested in securities start living higher than their $2000 a month Social Security reduced by $400 in Medicare Part B, Medicare for profit supplement, and private for profit Part D indurance payments, won't they need to sell those securities?

Who will buy the securities when more boomers are selling securities to not work than millennials buying securities with their much lower incomes from the focus on growing gdp by cutting labor costs and getting people to buy old existing securities to pump up security prices?

The Fed could do like Japan and buy all the securities boomers like me are selling.

We are talking about 55 companies, not Tepco. Tepco's yield is zero, since they stopped paying a dividend in 2010, but you can buy a Japan ETF with a total annual yield of 2.5%.

It helps that they don't have to keep it in cash. They can then go and invest in assets that produce a better yield.

Yes, but then the BoJ is just recycling money from one asset to another.

So if there's a bear market in stocks, the BOJ will lose a huge amount of money, right?

Are they planning on just papering over those losses with newly printed money?

Or would they use government money to recapitalize the BOJ, running a budget deficit to finance this recapitalization and then having the BOJ buy the bonds that recapitalized itself?

It's enough to make your head spin...

BOJ liabilities may become larger than their assets on their balance sheet, but this is not losing money strictly speaking, nor is it insolvency. Central banks that work in their own currency can't really run out of it. Money is a record of bank liabilities.

"Central banks that work in their own currency can’t really run out of it"

Very important point. I you do not understand the relevance of Japanese debt being issued in yen and held by Japanese, then the same mistake can be easily made in guessing at the relevance of a certain size of debt-to-GDP ratios in other countries. E.g., 100% debt-to-GDP is not fatal in the USA, but in other countries their fiscal and economic conditions are such that even 40-50% debt-to-GDP will leave many creditors running for the hills. In particular, that their debts are owed in a foreign currency (which they cannot print) and to foreign creditors (who they cannot screw by legislative writ).

Debts in a foreign currency are a problem but countries certainly can and do screw foreign creditors. Look at Argentina, for instance. U.S. courts are more willing than most to consider authorizing the seizure of a foreign country's property located in the jurisdiction of the U.S. to settle a debt but, even then, there are legal and diplomatic limits.

Fiscal and monetary policy with a vengeance. JP is the harbinger for the rest of the first world. When it implodes, the USD will also crash.

If the yen crashes, then the USD will soar. Because that's what you get when you're the international reserve currency and reserve currency number 2 or 3 crashes. Anyways, very unlikely scenario, at least in the next decade or two, especially considering who the main holders of Japanese treasuries, etc. are (mostly Japanese).

Paging Scott Sumner: With the Yen so strong and still no inflation, shouldn't the BOJ be buying whatever assets they can? And why not non-Japanese assets? Either the Yen drops and inflation expectations rise or you end up owning the world.

The BoJ is playing the world's largest game of chicken.

The National pension Service (NPS) owns 15% of the tradable shares in Korea.

Sometimes Japan seems like a snake swallowing itself.

Sure, just like if a company buys back enough of its own stock it will self-liquidate. It's fascinating to see how Japan handles things, because we are likely all headed for a similar fate (demographically).

Japan is showing the way. The rest of us aren't likely to need to go as far as they do. However our societies may panic and lose confidence politically speaking before we go as far.

"However our societies may panic and lose confidence politically speaking before we go as far"

Soiled your shorts yet?


Using foreign stocks as a small part of foreign reserves is just sensible balancing of assets. No big deal.

Using stocks as a significant part of the backing of your own currency is a different thing. Japan is well out in front.

Japans actually seems a bit different from other advanced economies, with a remarkably low-tech service industry, that can be automated more and more as pensioners get out of the workforce.

Tee hee. This is very amusing. What would the prices be if they weren't there?

Helicopter drops are better. No balance sheet problems.

No. Even worse balance sheet problems.

Politically that means Socialism. Economic socialism.



Another major central bank plowing into stocks is the Bank of Japan. On April 24 of this year, Bloomberg News reported that the Bank of Japan “ranks as a top 10 holder in more than 200 of the Nikkei gauge’s 225 companies…”

So the government is buying large amount of corporate assets (shares) AND cutting most areas of study which are particularly inquisitive in the political or social sense AND seem to want to change their constitution for military reasons, AND ... uh, OK, who cares about the price of the yen and the central bank. Someone had better keep a close eye on some of that other stuff, if you catch my drift.

How far down that road do you go before just another few tweaks and it's a "Nationalist Socialist" approach. Which is no guarantee of another Hitler figure, but, uh ... not really saying anything than "why not keep those wide open, hey?"

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