Japan's central bank playing activist investor role to revive economy
By Staff Writer
Japan's central bank has commenced operations in equity market as well. Being the central bank for the world's third largest economy, Bank of Japan is playing a role of activist investor in the domestic equity markets for the revival of the economy. Bank of Japan is also asking corporate companies to increase capital expenditure.
Bank of Japan (BoJ) is a dominant player in the domestic bond market. The central bank manages $54 billion in exchange-trade funds (ETFs). Now, the central bank is influencing the asset managers to design investment funds falling in line of Bank of Japan.
According to a report by Reuters, Bank of Japan is in the process of meeting heads of corporate firms and asking them to raise their capital expenditure. Bank of Japan's Governor Haruhiko Kuroda and Japan's Prime Minister Shinzo Abe are actively participating in this drive to increase the economic growth rate.
The Japan's central bank is keen on enhancing capital expenditure of corporate firms and wage rise as well. The continuous monetary and fiscal stimulus packages implemented during the past three years didn't provide the anticipated results for the government. Japan is witnessing weaker consumption and deflation state of economy.
Bank of Japan is relying on its hold as a mainly indirect owner of shares to extend its support and help corporate firms that spend more cash at home. The Japan's central bank is increasing its purchases in the equity market. However, the central bank has not yet announced its detailed investment criteria, as reported by Business Insider.
Responding to capital expenditure and wage growth drive by the Japanese government, Kohei Sasaki, manager of ETF promotion at Mitsubishi UFJ Kokusai Asset Management, said: "We're willing and considering to add such a product. We've already contacted index vendors on this matter."
Bank of Japan owns half of ETFs in Japan market. Seiichiro Uchi, managing director for index compiler MSCI in Tokyo, said: "We've already started trying to develop some kind of solution to the demand. However, it's not yet known whether this is feasible. You can't be dogmatic when it comes to developing a new index. You need to know what kind of index the BOJ and the ETF providers really want."
The Bank of Japan was the world's most hyperactive central banks during the past three years, according to The Wall Street Journal (WSJ). The Bank of Japan has been adding 80 trillion Yen ($660 billion) annually of the government bonds to its balance sheet. The central bank has already bought twice the size of the net bond issuance by central government.
The weaker Yen and central bank's zero interest rate have been helping Japanese companies make encouraging profits all these years. But, majority of companies are not coming forward to the pleas by central bank.