Bank of Japan posts $281m losses from QEs

This seems as poetic justice at work.

From Bloomberg,

The Bank of Japan has lost more than 22.4 billion yen ($281.7 million) purchasing exchange-traded funds as the Topix Index approaches a 27-year low.

The central bank’s stock holdings have fallen about 4 percent since buying began on Dec. 15, 2010, according to estimates calculated by Bloomberg using government filings. Losses climbed above 67.6 billion yen in September as equities plunged amid concern Europe’s debt crisis would trigger a global recession, the data show.

The purchases are part of a 20 trillion yen BOJ plan to stimulate economic growth and boost investor confidence by buying securities, such as government debt, commercial paper and real estate investment trusts. The central bank expanded the program last week by 5 trillion yen after the country’s currency reached a postwar record against the dollar, threatening the export-led economy.

“This is not what a central bank should be doing,” said Masaaki Kanno, the Bank of Japan’s former chief foreign-exchange dealer and now chief Japan economist at JPMorgan Chase & Co. Parliament needs “to debate if the program can get backing from the public after running a loss like this," he said…

This isn’t the first time the central bank has bought stocks. The BOJ in October 2002 purchased shares that financial firms owned in other companies to stem losses at banks after the Topix plunged 52 percent from a peak in February 2000. The BOJ’s investment foreshadowed a rally in the Topix, which bottomed in March 2003 and more than doubled over the next four years.

The BOJ’S ETF purchases accelerated this year after concern over Europe’s sovereign-debt crisis triggered a global equity rout and sent the Nikkei Stock Average Volatility Index on Aug. 9 to the highest level since the aftermath of Japan’s March 11 earthquake and tsunami. The central bank spent 403.5 billion yen on ETF shares tracking the Nikkei 225 or Topix since August, compared with 340.4 billion yen in the previous eight months, filings show.

The purchases, which are listed on the BOJ’s website, have taken place when Japanese stocks declined and have signaled better performance the next day. The Nikkei 225 fell an average of 1.9 percent on days when the BOJ bought, slipping 0.1 percent the following day, data compiled by Bloomberg show.

The investments represent a small part of Japan’s ETF market. The central bank spent 17.3 billion yen buying shares on Oct. 18, less than 1.5 percent of the total value traded in either Nomura’s Nikkei 225 or Topix ETFs, according to data compiled by Bloomberg.

The red arrow shows when the asset purchases began, which again seem to have worked over the short term, and how the Topix has been discounting Japan’s QEs over the longer term or during the one year period.

The $281 million loss may seem negligible to the above report, but it is important to point out that those who made these decisions that led to these ‘hefty’ losses which will eventually be distributed to the average Japanese via taxes, have not been held accountable.

That’s the way politics works; squandering people’s money has always been assumed away, and thus, the propensity to keep making the same mistakes over and over again. Ultimately taxpayers picks up the tab for the mess created by a few. Yes, political insanity.

Of course as earlier pointed out, the public (including the world) is being hoodwinked to believe that these mercantilist measures has been about supporting the “export-led” economy, which in reality isn’t. Exports account for only less than 15% of the GDP, so how can exports lead Japan's economy?

Instead, the whole saga of interventionism and applied inflationism (via QEs) has been meant to shore up Japan’s debilitating political institutions.

Eventually all these anticapitalistic actions will meet its destiny.

Poetic justice.