As I’ve been saying the world really is in a pickle. I’ve repeatedly said the world is in the midst of manipulated credit, currency and equity markets. Even the Fed’s Yellen is unlikely to raise rates because the US employment situation is under duress as I explained last week.
The Head of Japan’s stock exchange has admitted that Japan’s central bank now owns 58% of the Japanese Exchange Traded Funds (ETF) market which is around 20% of the overall market. The idea is that the Bank of Japan wants more ETF funds to be created so it can buy them. In a sense Japan will become a market of State owned Enterprises if it continues.
The reality of any market is that if it can’t stand on its own two feet without the BoJ pumping it full of air then the policy makers would be far better off looking to plug the leaks for a long term solution. That is in essence the problem with market manipulation. What the BoJ is doing isn’t illegal but it distorts the market reaching its natural level. Hence investors can carry no real confidence
If you want to look at all the money foreign investors are taking out of Japan’s stock market, the BoJ is merely giving a state subsidy for them to leave at a higher price. So what is designed as a plunge protection strategy is merely going into the pocket of Johnny Foreigner and not Mrs Watanabe.