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A.steve

"the Tokyo Whale Is Quietly Buying Up Huge Stakes In Japan Inc."

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I read this article a few days ago...

http://www.bloomberg.com/news/articles/2016-04-24/the-tokyo-whale-is-quietly-buying-up-huge-stakes-in-japan-inc

I have thought about it, quite a lot, since... and I'm not sure I've got my head around the implications.

My interpretation of the article is that it tells us that the BOJ (the Japanese Central Bank) has created over $3tn (or Yen equivalent thereof?) and used this to purchase shares through retail ETF products. This, to me, sound so crazy and dangerous that I can't help but wonder: has been some misunderstanding.

If my interpretation is accurate, is there other, corroborating, evidence to support the Bloomberg story?

If the Japanese stock market is directly manipulated, on such a huge scale, does this mean that other stock markets are also directly manipulated by other central banks... or does it mean that the BOJ have created a new one-way bet?

I note that it is not April Fools' day for another two days. I would welcome the insights of any HPC armchair economists who, like me, find this a fascinating story.

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Once you can print money regardless and then give it to yourself as first in line then why wouldn't you buy up companies (through shareholdings etc) - and in fact eventually everything else in the world.

Once you started why would you ever want to stop.

You could always call it something like "stimulus" to try to fool everyone.

Edited by billybong

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Ever day I am amazed how long this has been going on without the West and Japan turning Venezuelan. But gravity always wins in the end.

Edited by Silverfinger

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Then there's the possible issue that being a major and perhaps controlling shareholder in any company allows the money printers better access to all sorts of personal and financial data for the employees and customers of that company. With supermarkets all the shopping habits through loyalty cards.

As the money printers have strong links to government it becomes more than just an economic matter it starts to get into politics, privacy and the issue of overall control.

Again the taxpayer (and the saver) is being forced to subsidise policies that they might not agree with.

Edited by billybong

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I posted this article by Shaun Richards on this matter the other day Steve.

https://notayesmanseconomics.wordpress.com/2016/04/25/the-bank-of-japan-becomes-the-tokyo-whale/

An interesting blog... though, from my perspectives, one that focuses on the practical specifics, of the idea, more than the systemic consequences.

Like for you, it also made me think about militarization... though I'm not sure that's the intended purpose.

The Bloomberg article made me rack-my-brain for examples from history where similar things have occurred... (My memory about specific historic material, in general, leaves much to be desired!) Is it plausible that the BOJ is alone in this kind of market intervention? The BoJ coordinated with the Fed, ECB, BoE -etc- over QE... raising the question: is this part of global coordinated action too? If so, what balances the intervention (in markets focused on other countries) - if nothing... What are the most likely consequences of the international disequilibrium this necessarily introduces?

While I don't doubt your 'blogging integrity'... it looks as if your source was also (just) the Bloomberg article? If this idea emerges from a common source (given how bonkers it is) I find myself wondering if it is a reaction to inaccurate claims that have been amplified by commentators. If I'm going to believe it, I'm going to need to find some corroborating evidence independent of the Bloomberg article. I'm making little headway.

One way bets, we've seen before in the currency market, known as the "Carry Trade".

That's exactly what I was alluding to... :)

Edited by A.steve

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Its all about asset prices...they must be maintained.

And Aprils Fools day was 29 days ago.

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And Aprils Fools day was 29 days ago.

Damn, what happened to March?!?! Conversely, that means the Bloomberg article could be founded on an April Fools' joke - I suppose?

Edited by A.steve

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There will be no slow unwind of this lunacy. I expect one day we will wake up and the world will have changed beyond recognition. Don't panic last.

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The general principle seems to apply to the ECB as well


https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.html

Expanded asset purchase programme

The expanded asset purchase programme (APP) adds the purchase programme for public sector securities to the existing private sector asset purchase programmes to address the risks of a too prolonged period of low inflation. It consists of

third covered bond purchase programme (CBPP3)
asset-backed securities purchase programme (ABSPP)
public sector purchase programme (PSPP)

Monthly purchases in public and private sector securities will amount to €80 billion (from March 2015 until March 2016 this figure was €60 billion).

They are intended to be carried out until the end of March 2017 and in any case until the Governing Council sees a sustained adjustment in the path of inflation that is consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term.

Before long the central banks will be turning up at the local boot sales, jumble sales and auctions to buy up all the tat that nobody wants anymore.

That's if they don't already - supporting the economy.

Edited by billybong

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CBs putting their fiat cash into hard assets? Shares are a form of hard asset, before any gold bugs argue otherwise, as you're investing in people, equipment, ideas, productivity and sales.

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Central banks use their balance sheets to buy all sorts of assets to fulfill their mandates.

Typically currencies, gold, government bonds and corporate bonds.

Oddly none of the goldbugs seem to object when they buy/hold ("manipulate" price of) gold, only when they sell it.

There was some discussion too over last year whether they could/should also buy oil (futures) to help prevent deflation

If these activities fall within the remits given to them by democratic governments (as they do) then why not.

But it would be preferable if governments also used their balance sheets more effectively too. For instance UK should clearly build houses & more urgently repair the utterly disgraceful roads Osborne has destroyed & the "free market" has failed to fix.

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How many of the central banks' private sector equity investments will turn out to have been zombie investments. Most of them is a fair bet.

Edited by billybong

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How many of the central banks' private sector equity investments will turn out to have been zombie investments. Most of them is a fair bet.

Once QE has failed to produce, they expand the remit on purchases.

In a healthy economy, actual economic players would buy the assets without printing up paper.

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It's also a fair bet that the BoE is doing something similar but as the BoE prefers to do things in secret then they likely won't be broadcasting it or which individual shares they're buying.

Edited by billybong

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I read this article a few days ago...

If my interpretation is accurate, is there other, corroborating, evidence to support the Bloomberg story?

News is PR. Ignore all news. Just look at the price and the charts.

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It's probably at least partly coordinated at places like the BIS - the directors being the central bankers of the major countries and other countries with smaller economies being members.


The BIS Board of Directors

Chairman: Jens Weidmann, Frankfurt am Main
Vice-Chairman: Raghuram G Rajan, Mumbai

Mark Carney, London
Agustín Carstens, Mexico City
Luc Coene, Brussels
Jon Cunliffe, London
Mario Draghi, Frankfurt am Main
William C Dudley, New York
Stefan Ingves, Stockholm
Thomas Jordan, Zurich
Klaas Knot, Amsterdam
Haruhiko Kuroda, Tokyo
Anne Le Lorier, Paris
Fabio Panetta, Rome
Stephen S Poloz, Ottawa
Jan Smets, Brussels
Alexandre A Tombini, Brasília
François Villeroy de Galhau, Paris
Ignazio Visco, Rome
Janet L Yellen, Washington
Zhou Xiaochuan, Beijing

Edited by billybong

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It's also a fair bet that the BoE is doing something similar but as the BoE prefers to do things in secret then they likely won't be broadcasting it or which individual shares they're buying.

Durr...

House builders and foxtons, of course.

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Durr...

House builders and foxtons, of course.

Indeed quite likely from time to time - but not exclusively. More likely big capitalisation blue chip companies. They don't say as they like to do things in secret - they were reported to have said that after the economic collapse when they thought their actions were under too much scrutiny. Northern Rock and so on.

Also presumably whenever the shares are a constituent of the major share indices which are being supported.

Edited by billybong

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CBs putting their fiat cash into hard assets? Shares are a form of hard asset, before any gold bugs argue otherwise, as you're investing in people, equipment, ideas, productivity and sales.

I was doing the same thing earlier in the year, moved most of my SIPP assets into boring FTSE100 divi-payers.

I have very little faith in fiat money which are simply promises to be broken. I don't like BTL as it is basically hoarding, I don't like gold because it doesn't produce anything, I don't like bonds any more (promises to be broken again).

The next crisis will be in trust.

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Ever day I am amazed how long this has been going on without the West and Japan turning Venezuelan. But gravity always wins in the end.

Indeed.

Japan will collapse at some point in the near future.

Just not sure when.

If I was Jap government Id be spending my printed Yen on yielding assets abroad - fuel, food and the like.

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I was doing the same thing earlier in the year, moved most of my SIPP assets into boring FTSE100 divi-payers.

I have very little faith in fiat money which are simply promises to be broken. I don't like BTL as it is basically hoarding, I don't like gold because it doesn't produce anything, I don't like bonds any more (promises to be broken again).

The next crisis will be in trust.

I agree completely, although I'm also putting monthly into a Vanguard Global Fund because it's heavyweight in America and Europe (and I haven't got enough to buy a house for myself yet*, let alone one to rent out!). I'm hoping housing is expensive, bonds are a massive bubble, and shares are cheap or fairly valued.

*Not where I'd want to live

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It's also a fair bet that the BoE is doing something similar but as the BoE prefers to do things in secret then they likely won't be broadcasting it or which individual shares they're buying.

No it isnt. BoE are very clear and specific which assets they purchase for their balance sheet.

£375bn in UK government gilts specifically as part of their QE prorgam.

Ditto ECB.

They precisely DO want to broadcast which assets theyre buying else it rather defeats the point of buying them.

here is the BoE b/sheet in all its glory:

http://www.bankofengland.co.uk/markets/Pages/balancesheet/default.aspx

Edited by R K

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Conventionally you would say that any country that prints its way out of insolvency should collapse, but this is a much bigger picture question. This doesn't happen in economies that have deep capital markets where debt is required to keep the system going.

As people get older they spend less and earn more (until retirement), the idea of capitalism is simply an inter generational ponzi scheme of asset rises via debt as an intermediary. As long as there are more people on the bottom of the pyramid than the top the asset prices can be paid - divided amongst the many. The problem comes when you do not get enough immigration (or foreign interest) to support the prices and your population declines e.g Germany, Japan. Your way of live becomes impossible. Worse still, the elite educated are working on more and more ways to make higher paying jobs obsolete e.g one click delivery from amazon will get rid of every retail store except department stores and replace these manager to shelf stacker jobs with warehousing jobs and robots.

The education gap has got wider and wider and immigration has helped to lower the standard of the working class in the last decade in most western (japan included) economies as they ultimately work for less and demand less conditions.

If I can argue that capitalism is ultimately a game of arbitrage, where you buy goods and services of the same quality from cheaper and cheaper locations (i.e those that somehow produce goods more efficiently regardless of damage to environment or workers), ultimately what should happen is a great leveling - the people living on $2/day will earn more and the people living on $150/day will earn less. So, you will find that as we integrate Europe or make trade agreements the standard of living for anyone who is not in the education elite, already rich, or in politics will get worse. This is not in of itself a bad thing, we will have shelter, food, water, entertainment, a small amount of capital and safety for you kids - and your kids will have the same. For most people they don't really want anything else - for a lot of people on this planet who don't have these things they would kill to have them.

Back to the question at hand? How can Japan do this? As a country which relies on the debt system in order to sustain capitalism, no entity in the Western world will call their bluff on their emperor's new clothes, as they are doing it to. Ultimately, they are biding their time trying different things until something works, just like anyone would in this circumstance. What they think they need is inflation to shrink debt and continue the ponzi scheme, but it looks as though their population just isn't in the mood to spend as they are older and could care less about asset purchases. This obviously screws the young but most can be distracted for 10-15 years through rhetoric and entertainment, they barely know now they system works and actually believe that institutions are their to help them rather than keep the system going. With communism also relying on capitalism, Russia and China also have no desire to completely upset the model, so you have no breaks on capitalism at all. It will as Karl Marx said, eat it self. Until we find a better way to allocate the debt (which grows exponentially) to the population (which grows at a slower rate) we cannot let this system die so the central banks keep buying everything - until they own it all, then the penny would actually drop.

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