keystone cops
Furthermore, the Financial Times recently presented evidence of the BOJ’s willingness to step in and buy the dips – the exact practice that Kiyota is criticizing – by showing that the central bank stepped in on half of the market’s down days between 2013 and 2017. Of the 1,038 business days between April 2013 and March 2017, there were 449 sessions where the market was down: the BOJ bought during more than half of them.
While the BOJ doesn’t buy individual shares directly, it’s the ultimate owner of stakes purchased through ETFs. Estimates of the central bank’s underlying holdings can be gleaned from the BOJ’s public records, regulatory filings by companies and ETF managers, and statistics from the Investment Trusts Association of Japan.
Last week, the BOJ kept monetary policy, including the ETF program, unchanged after the close of its two-day policy meeting, as was widely expected.
Critics complain that the BOJ purchases are giving a free ride to poorly-run firms and crowding out shareholders who would otherwise push for better corporate governance. But a far more substantial question is often ignored: Just how will the BOJ ever unwind its unprecedented holdings of not only bonds, which are now roughly 100% of Japan's GDP, but also of stocks, without crashing both markets?
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