Bank of Japan Buys Record Amount of Equity ETFs: Once Upon a Time

After cornering the bond market, the Bank of Japan has its sight on the stock market with a Record Buying Binge in March.

The Bank of Japan spent 833 billion yen ($7.8 billion) on exchange-traded funds tracking the country’s shares last month, the largest amount ever according to data back to 2010. The BOJ stepped in as the Japanese market slumped and its benchmark Topix index inked its first back-to-back monthly declines since the start of 2016. Haruhiko Kuroda’s bank is now ahead of its scheduled goal to spend about 6 trillion yen a year on ETFs. “If the market keeps on falling, there will be the problem of what they do next,” said Kazuyuki Terao, chief investment officer for the Japan arm of Allianz Global Investors.

Problem? What Problem?

Just buy them all. 100% of every ETF. Given the Bank of Japan has cornered the bond market, it's simply the logical next step.

Once Upon a Time

Once upon a time, I seem to recall central banks discussing and setting monetary policy in a very strange way.

For those of you not old enough to remember, the Fed and other central banks actually discussed the growth rate of money supply at monetary policy meetings.

How peculiar, to actually discuss money at monetary policy meetings. Those silly days are gone.

New Normal

• Central banks now sponsor negative interest rates, something that could never happen in the real world.
• The Bank of Japan and the Swiss National Bank are playing roulette with the stock market.
• The Fed embarked on three rounds of QE to force bond yields lower.
• The ECB is still at it, in a clear attempt to keep Italy on life support.
• The Bank of Japan has essentially cornered the entire bond market of Japan, allowing the interest rate on the 10-year note to vary no more than 1 basis point.

This folks is the new normal. But why stop now?

Buy all the assets and be done with it.

Japan and other central banks want to sponsor inflation. Thay can't get it because they do not understand what it is.

Once again, I present Mish’s Sure Fire Proposal to End Japanese Deflation: Negative Sales Taxes, 1% Monthly Tax.

I did a follow-up post on the same theme: Note to BoJ: Try Something Different or Look Perpetually Foolish.

This would be a great test of MMT. I am waiting for it.