The Bank Of Japan Bought 5.6 Trillion Yen In Stocks Last Year
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
– Ludwig von Mises, Human Action
In recent years, thanks to central bank intervention in virtually every asset class, writing about capital markets in the context of some valuation or fundamental analysis framework has become a laughable, surreal, and self-defeating exercise, and here is a perfect example why.
For one reason or another, overseas investors dumped Japanese stocks by the largest margin in 31 years in the fiscal year ended Sunday, according to official market data: specifically, market participants abroad unloaded about 5.63 trillion yen ($50 billion) worth of shares on a net basis, the Tokyo Stock Exchange reported Thursday, for a second straight year of net selling and the highest sell-off since 1987.
And yet this barely caused a ripple in asset prices for one simple reason: the Bank of Japan’s asset purchases absorbed all the bleeding, exposing the central bank’s outsize role in the market. Indeed, as the Nikkei adds, this near-record liquidation was matched nearly yen for yen by the BOJ’s pumping of money into the economy through asset purchases, with the central bank buying 5.65 trillion yen worth of equity!
Of course, there were legitimate reasons why foreign investors felt the urge to liquidate Japanese holdings: international investors unloaded Japanese shares as they became alarmed by concerns about a global slowdown. With many Japanese manufacturers reliant on exports, overseas analysts cut their recommendations for those stocks amid China’s decelerating economy and Beijing’s trade war with the US.
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