The $5 Trillion Monster Now Tormenting Japan’s 2021


Bank of Japan Governor Haruhiko Kuroda may have just pulled off history’s biggest tease.

Since 2013, Kuroda has overseen an unprecedented expansion of a central bank’s balance sheet. By late 2018, it topped the size of Japan’s $5 trillion economy—and has only grown since. Though most of those purchases were bonds, the BOJ also hoarded stocks via exchange-traded funds with increasing fervor.

In 2020 alone, Kuroda’s team added $65 billion to its ETF holdings, making the BOJ Japan’s investment “whale.” That’s up from $38 billion in 2013.

Yet in May—and here comes the big tease—the BOJ went an entire month without adding to its EFT holdings, the first 30-day pause in eight years. That has many investors believing Kuroda is suddenly serious about pulling BOJ support for stocks.

Don’t bet on it, as Japan’s Covid-19 recovery lags the rest of the developed world, and perhaps significantly.

The yen’s 6% drop versus the U.S. dollar tells the story as well any data set. As North America and Europe stabilize and begin producing decent growth, the forces behind Japan’s downturn remain stubbornly negative. Retail sales, industrial production, wages and business confidence have many economists convinced Japan might not return to pre-Covid levels until 2023.


Please enter your comment!
Please enter your name here