Bank Of Japan’s ETF Holdings Surge 80% To Cartoonish 16,000,000,000,000 Yen

[Tsing Tao]

The sheer fact that Japanese taxpayers (those ultimately responsible for BoJ debt) have a SINGLE YEN being spent by the BoJ to buy publicly-traded corporation stock is an utter disgrace.

If I am Japanese, why should my tax dollars be spent on propping up the value of Sony Corp.'s CEO's stock holdings?

 

[Martinghoul]

Curious, here. Are you saying there is no truth to any of it?

There is absolutely truth to it. I am not disputing the stories, I'm just saying that I am familiar with them, is all.

So if I am a central bank, and can print as much money as I want and use it to buy up direct shares of a foreign company until I was the majority shareholder, and then put board members and exert influence on that company to do whatever it is I wanted, you don't see any issue at all in this? Take away the aspect of market manipulation in any regard.

Lets suppose I influence a defense contractor.

You think this is just peachy, right?

Firstly, I am not aware of any CB that is currently able to purchase a stake in a company to a point which would allow them to put people on the board. Secondly, in the context that you're referring to, how is a central bank different to another foreign entity, such as a sovereign wealth fund? For example, Norges Bank owns Raytheon, McKesson, United Technologies, etc and nobody seems to be too alarmed by that. I don't see anything not peachy about this per se. If your government feels that some national security concerns arise from a particular shareholding or takeover, it can always intervene in the "free" capital mkts.

 

[Tsing Tao]

There is absolutely truth to it. I am not disputing the stories, I'm just saying that I am familiar with them, is all.

Ok, my misunderstanding.

Firstly, I am not aware of any CB that is currently able to purchase a stake in a company to a point which would allow them to put people on the board.

What mechanism is in place to prevent them from doing so?

Secondly, in the context that you're referring to, how is a central bank different to another foreign entity, such as a sovereign wealth fund? For example, Norges Bank owns Raytheon, McKesson, United Technologies, etc and nobody seems to be too alarmed by that. I don't see anything not peachy about this per se. If your government feels that some national security concerns arise from a particular shareholding or takeover, it can always intervene in the "free" capital mkts.

The notable exception between the Sovereign Wealth Fund and the Central Bank is that the Central Bank can print an unlimited supply of currency to fund its activities, of course.

But your point is well made, there should be something to prevent such acts - especially because of the limitless supply of funding.

 

[Martinghoul]

What mechanism is in place to prevent them from doing so?

The notable exception between the Sovereign Wealth Fund and the Central Bank is that the Central Bank can print an unlimited supply of currency to fund its activities, of course.

But your point is well made, there should be something to prevent such acts - especially because of the limitless supply of funding.

In the US, I believe this is the mechanism:
https://www.treasury.gov/resource-c...es/Committee-on-Foreign-Investment-in-US.aspx

This seems to be a decent writeup on the subject, more broadly:
https://www.cfr.org/backgrounder/foreign-investment-and-us-national-security

 

[Tsing Tao]

In the US, I believe this is the mechanism:
https://www.treasury.gov/resource-c...es/Committee-on-Foreign-Investment-in-US.aspx

Not worried about the Fed doing this (yet). It's the ECB, SNB, BoJ that have gone bonkers as of late (the last two in particular).

This seems to be a decent writeup on the subject, more broadly:
https://www.cfr.org/backgrounder/foreign-investment-and-us-national-security

That talks about prevention of direct investment (ie, the outright purchase of domestic companies and assets) not the purchase of shares leading to a majority owner's stake. That's more "stealthy" and more problematic.

Regardless, central banks are way, way off the reservation now - a full 9 years after the crisis. The lunacy at this point is still increasing - not decreasing and just you wait until the next crisis hits. At that point we'll have gone full retard. And you never want to go full retard.

 

[Martinghoul]

Regardless, central banks are way, way off the reservation now - a full 9 years after the crisis. The lunacy at this point is still increasing - not decreasing and just you wait until the next crisis hits. At that point we'll have gone full retard. And you never want to go full retard.

Again, let me ask you, at least about the SNB specifically...

What do you think the SNB should be doing with its foreign exchange reserves?

 

[jj90]

Actually, the thing is the central bank - whose job is to ensure price stability.....

You answered your own question here and contradicted your own claim. Major asset vol is at all time lows.

Next.

 

[Tsing Tao]

You answered your own question here and contradicted your own claim. Major asset vol is at all time lows.

Next.

Price stability, as in consumer prices paid. Not prices of financial assets.

Duh.

 

[Tsing Tao]

Again, let me ask you, at least about the SNB specifically...

What do you think the SNB should be doing with its foreign exchange reserves?

How about not pegging to the euro? How about lowering rates until deposits are charged such negative rates that no one wants to hold swiss francs for more than 30 seconds?

 

[jj90]

Price stability, as in consumer prices paid. Not prices of financial assets.

Duh.

And do consumers not pay for a share of stock? Is it magically free in Japan?

What's the opposition to CBs taking a role in financial markets now?

Like I said, next.