The Bank of Japan (BoJ) has decided that printing money and buying every bond issued by the Japanese government isn't enough. Now it needs to print money and buy Japanese stocks. I don't have link in front of me, but according to a story in the Wall Street Journal, the BoJ is going to buy $3T Yen worth of Nikkei 225 stock funds this year. Let's use the US as a comparison to see what effect this will have on the market.
$3T Yen is $30B. The Japanese economy is 1/4 our size, so that's the same as the Fed buying $120B worth of, say, S&P 500 stocks. The S&P 500 daily volume is on the order of $94B. $120B of investment in a year would be buying $1B of stock every 3 days. Taking account of weekends, if you bought S&P 500, you'd bump $94B to $95B every other market trading day. That doesn't sound like it would have much of an effect on the market. It might not be a good thing for a central bank to have billions of dollars in volatile assets in its portfolio, but that's another story.
During my time in the UK, I learned a valuable lesson about socialism and government ownership of volatile investments. At that time, the North Sea oil fields (BP) were majority-owned by the British government. The price of oil plummeted. Hence, the entire nation was poorer. The British pound and the dollar were at parity.
ReplyDeleteThatcher privatized BP and went on to save the UK, formerly known as "the sick man of Europe", languishing in thrall to labor unions and socialist policy, and who had been bailed out by the IMF, much like Greece today.
Anyway, one benefit of the ongoing Japanese economic miasma is that we're not peppered with tiresome stories about the superiority of "Japanese management" anymore.