December 25, 2016 1:21 am JST
Exclusive

BOJ the top buyer of Japanese equities

Bank's ETF purchases up 40% in 2016, hiding foreign investors' selling

TOKYO -- The Bank of Japan is set to become the biggest buyer of exchange-traded funds in 2016 for the second straight year.

According to data through Thursday, the value of the BOJ's ETF purchases this year has topped 4.3 trillion yen ($36.5 billion), up 40% from 2015. Last year, the central bank bought more than 3 trillion yen worth of ETFs.

The data was released by the BOJ and compiled by the Tokyo Stock Exchange.

While foreign investors sold more than a net 3.5 trillion yen worth of Japanese shares through Dec. 16, trust banks, including those commissioned by the Government Pension Investment Fund, bought a net 3.5 or so trillion yen worth of shares, the data shows.

The figure for trust banks was below that for the BOJ, which "will become the largest buyer of ETFs this year," said Masatoshi Kikuchi of Mizuho Securities.

This year, the central bank increased its buying after doubling its annual ETF goal to purchase 3 trillion yen worth of the instruments. The decision came in July as the bank stepped harder on its yen-printing pedal.

The central bank's ultimate goal is to flood the economy with so much money that prices get moving predictably upward again; the BOJ is targeting a 2% inflation rate.

The value of the bank's ETF holdings, based on purchase prices, is 11 trillion yen. However, unrealized gains send the market value to 14 trillion yen, according to an estimate by Mitsubishi UFJ Kokusai Asset Management.

Although foreigners have bought more than a net 2 trillion yen of Japanese shares since November -- Donald Trump was elected president early that month -- the amount does not offset their selling in the first half of 2016.

The BOJ's ETF program has propped up share prices but distorted "the formation of stock prices," said Shingo Ide of NLI Research Institute.

The ETF-buying program allows the central bank to purchase a wide range of stocks regardless of the issuing companies' business results.

(Nikkei)

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