In the wake of the BoJ’s Thursday decision to follow Haruhiko Kuroda further and further into policy Neverland, it’s probably worth reminding you about just how surreal the situation has become with regard to the “Tokyo Whale” and its ETF book.
For those who might have missed our most recent posts on this, you’re encouraged to check out “Revisiting The ‘Tokyo Whale’” and “Bank Of Japan’s ETF Holdings Surge 80% To Cartoonish 16,000,000,000,000 Yen.”
In that latter piece we noted that through March 31, the BoJ’s ETF book had ballooned to an absolutely ridiculous 15.93 trillion yen. That means Kuroda quite literally owns nearly three quarters of the entire Japanese ETF market.
“Implicit in that assessment is the notion that the bank is a major shareholder in some Japanese corporates,” we added, stating the obvious.
Well earlier this week, Bloomberg reported that “some officials at the Bank of Japan are increasingly concerned about the sustainability of the ETF program.” Given the above, you can hardly blame them, right?
But as if the numbers we threw at you above weren’t absurd enough, consider this from the same Bloomberg article:
The NLI Research Institute has forecast that the BOJ could own almost three quarters of the free-floating shares of Fast Retailing Co., the most heavily weighted company on the Nikkei, by March of next year, and almost all of them within three years. Fast Retailing’s free float is relatively small compared to its outstanding shares because of the large amount of shares held by the family of the company’s founder.
Ok, so the names in that chart won’t surprise regular readers as we’ve mentioned them before (there’s a table that lists them and others in the linked posts above), but read that bolded bit from the Bloomberg excerpt again. Kuroda is going to end up owning the entire goddamn free-float of the company that operates Uniqlo stores within 36 months.
But don’t worry, because here’s what he (literally) said on Thursday after the BoJ policy decision: I “won’t speak at company shareholder meetings.”
And it gets still funnier. Here’s a quote from Akira Kiyota:
It’s not good in the long run. If you keep buying 6 trillion yen a year, that means constant distortion.
Who is Akira Kiyota, you ask? Oh, just the head of Japan’s stock exchange.
That’s right, Japan Exchange Group Inc.’s Chief Executive Officer now publicly admits that what the BoJ is doing is “constantly distorting” the market.
Volatility on the Nikkei is sitting at a 12-year low:
That is of course attributable in part to Kuroda.
“The stock index levels themselves might be good, but Japan’s cash market isn’t really active,” the above-mentioned Kiyota told Bloomberg in an interview last week. “When volatility decreases, trading volume also shrinks.”
Despite all of this, Kuroda is still openly denying what he’s obviously doing. Here’s what else he said on Thursday following the BoJ meeting:
- Kuroda: BOJ isn’t committed to level of stocks or their moves
- Kuroda: BOJ’s ETFs are a small proportion of overall equity market
- Kuroda: BOJ’s ETF holdings aren’t harming corporate governance
- Kuroda: BOJ’s ETF buying isn’t aimed at stock prices.
Note that last bullet point. I’m not sure that contention holds up under scrutiny, because as SocGen reminds you, “from January 2011 to end-March 2017, 85% of ETF purchases declared by the BoJ occurred on a day where the TOPIX index registered a negative return.”
Anyway, I don’t know why we (or anyone else for that matter) even bother, because as noted overnight, these are just the kind of sarcastic appraisals that Kuroda thinks everyone should avoid.
“What we need,” Kuroda famously said in 2015, “is a positive attitude and conviction.”