Home Admits BOJ Admits It Has Lost 3 Trillion Yen On Its Equity Purchases...

BOJ Admits It Has Lost 3 Trillion Yen On Its Equity Purchases Despite Literally Printing Money Out Of Thin Air


Long gone are the days when central banks pretended they aren’t in the business of propping up the stock market.

A week after we reported that the BOJ had bought a record amount of ETFs in a desperate attempt to stabilize its illiquid stock market, where the central bank now owns over 73% of all ETFs, Kuroda bought a whopping 121.6BN yen of ETFs on Tuesday, the most on record, and just one day after the BOJ doubled the upper limit of ETFs it can purchase to 12 trillion yen, without however answering where it will get all those ETFs from.

The purchases in its core ETF program jumped by 20% to 120.4BN yen from the previous record of 100.2BN yen; while ETFs bought in the BOJ’s “physical and human capital” program – whereby the BOJ directly admits it is rewarding companies for pursuing policies that it finds appealing such as higher jobs – remain at 1.2b yen. Finally, the BOJ’s J-REIT purchases rose to 1.5BN yen from 1.2BN yen.

The unprecedented creeping nationalization of Japan’s stock market – which has made even the USSR spin in its grave – can be seen in the chart below:

Of course, none of the above is a problem as long as the market keeps levitating higher and higher, however once the crash arrives, people are bound to start asking question.

And as we noted last week, the crash did arrive…

… and the questions emerged. Like for example now that the Nikkei has plunged below the BOJ’s cost basis on its ETF purchases, how big are the losses for all taxpayers.

Answering just this question on Wednesday, Kuroda said that the amount of losses on exchange-traded funds held by the central bank is estimated at 2 trillion to 3 trillion yen as a result of the current crash.

The estimate is based on the current levels of Nikkei225, Kuroda said at a meeting of the Financial Affairs Committee of the House of Councillors, the upper chamber of the Diet, the country’s parliament.

And as noted above, the BOJ decided to double down, literally, on its market propping activities, and earlier this week it announced it would double its annual purchases of ETFs to 12 trillion yen as part of its additional monetary easing measures adopted Monday.

Kuroda also stressed that stepped-up ETF buying by the central bank has “certain effects as a monetary easing step”, which in addition to more gibberish by the 75-year-old, simply meant that the BOJ is doubling down on its purchases because it is now underwater on all of its purchases to date!

It gets better: unwilling to admit the truth until the bitter end of what the BOJ really does , which for the BOJ would mean that moment when its paper losses surpass its capital bases, Kuroda said that ETF purchases aren’t designed to buoy stock prices – something they most clearly are designed to do – but instead to prevent “risk premiums from rising”, whatever that means: perhaps as part of her daily discussions with out daytraders, inbetween discussions of K-Pop, what bread is especially stale today, and whether Fukushima’s gamma radiation will kill off the coronavirus before the coronavirus kills all the participants at the 2020 Olympics, Mrs Watanabe also wants to know the daily risk premium level is.

Somehow we doubt it, and for a good reason: this is just Kuroda’s typical way evading a question by answering some totally non-sequitur gibberish which nobody dares to question afraid to look dumb, when in fact the dumbest person in the room is that one who now has a 3 trillion yen paper loss despite literally being about to print money out of thin air at a moment’s notice and buying whatever he wants.