In Shocking Finding, The Bank Of Japan Is Now A Top 10 Holder In 90% Of Japanese Stocks

While the Bank of Japan’s name is nowhere to be found in regulatory filings on major stock investors, the monetary authority’s exchange-traded fund purchases have made it a top 10 shareholder in about 90 percent of the Nikkei 225 Stock Average, according to estimates compiled by Bloomberg from public data. It’s now a major owner of more Japanese blue-chips than both BlackRock Inc., the world’s largest money manager, and Vanguard Group, which oversees more than $3 trillion.

Furthermore, recall what we have been saying ever since 2010, namely that central banks are nothing more than glorified risk-free hedge funds (because they can always print more funds if they need them)? Well, back then it was another conspiracy theory. Now it is an accepted fact: "When you see the numbers, you see it’s quite a decent holding,” said Nader Naeimi, the Sydney-based head of dynamic markets at AMP Capital Investors Ltd., which oversees about $120 billion. “Central banks are becoming big hedge funds."

I understand that this site is full of breathless headlines heralding TEOTWAWKI. But, when a central bank starts buying stock as the BOJ and undoubtedly the FED are doing, they do become risk-free hedge funds that can print an unlimited amount of currency. They can buy anything.

This will continue until the central banks either own everything or the holders of assets will no longer sell them for the currency the central bank offers. The big question is when one of these events will occur and what will happen when it does.

So, if the BOJ owns app. 90% of the Nikkei 225, what is the true market value of the remaiing 10%?

The math doesn't quite work that way. They are a top 10 owner in 90% of the companies. A top 10 owner could own much less than 10%. So, 90% could be owned by others. And could be much less.

But still a troubling situation.

But this is not shocking at all, when it comes to Japan. It is how the Japanese government has financed itself since the days of the shoguns: start up corporations, and get them to finance the government in return for remaining in business as essentially monopolies in their respective fields. It’s crony capitalism, and it “works” in Japan because of the unwritten relationship between the samurai and the merchant classes: the merchant class provides the funding for the samurai, and the samurai provide legal protection for the merchants.

P.S. Shinzo Abe is the son of former PM Shintaro Abe, who was the son of former Diet member Kan Abe. The Abe family were merchants; they had the soy sauce monopoly in Yamaguchi prefecture, just west of Hiroshima. 100 years ago the Abes married into the Sato and Kishi families, who were samurai, and have provided a number of prime ministers on their own: Eisaku Sato was the PM in the late 60s when I lived in Japan, and Shinzo’s wife is Yoko Kishi, the daughter of former PM Nobosuke Kishi. We talk about the incestuous nature of American politics, but we have nothing on Japan.

So, how do you think this ends?

Inside Japan, very little will change: the Japanese people are rarely rebellious, they tend to suffer in silence--the term is 仕方が無い shikata ga nai, a generalized term of resignation towards something you have to put up with.

When it comes to Japan, what concerns me more than anything is demographics rather than finance. Japanese take care of themselves better than most people, and so live longer than most people. But there aren't enough children being born (later marriages, rampant abortion, the high costs of raising a child all contribute) and the elderly are living much longer, so the population number is shrinking. Moreover, Japan will NEVER allow immigration because it would supposedly water down the Japanese gene pool, so their immigration problem is the opposite of ours. When the labor force shrinks to nearly nothing, that is when the societal collapse will occur.

And one more thing. Japan's population during the Edo era (1600-1868) remained stable at about 30,000,000, largely due to occasional famines, diseases, and infanticide. It was during the industrialization of the late 1800s that the population skyrocketed to 60,000,000 by 1900, and nearly 100,000,000 by the 1930s, and that was at least partly the impetus for Japan's expansion into Manchuria and Jehol, a Japanese version of lebensraum. So I have no fear of a remilitarized Japan going back to a WWII mentality, because the Japanese do not want to have an empire. What I fear is that there will be a hollowing out of Japan, to the point where it will be easily conquered by a remilitarized China--and all the WWII Chinese may be dead and gone, but that doesn't mean China has forgotten the atrocities the Japanese did against them and still refuse to admit to, so all it would take is one Chinese tyrant to conquer a hollowed-out Japan, perhaps a generation from now.

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