Japan's Nikkei Flies 3.98% Yesterday as PM Abe’s Two Ministers Resigns

As expected, Friday’s US-Europe pump apparently did spill over to Asia. But the gains have been much unimpressive for the region except for Japan’s Nikkei. Japan's key equity bellwether recovered four fifth of last week’s losses in just one day!

From collapse to melt up. Yet despite yesterday’s fabulous 3.98% surge, the Nikkei remains down by 7% from the recent highs.

The Japanese government made sure that the US-Europe pump had a domestic component.

Remember Japan’s government hasn’t been coy in lending support to her stock markets. Stock markets, as I have been saying here, have become propaganda tools for governments—where higher stock market are portrayed as G-R-O-W-T-H so as to gain popular (approval rating) support.

As for stock market support, Japanese traders have noted of the “1% rule” where the Bank of Japan (BOJ) intervenes each time the Nikkei falls 1% and below by buying the ETFs of the index and or individual stocks. 

The BOJ’s serial interventions has led to a record accumulation of 7 trillion yen in stocks and ETFs last August. Nonetheless record intervention appears to falter as the Nikkei has been on a decline with the exception of yesterday

And now for yesterday’s domestic icing on the cake pump; from Bloomberg:

Japanese shares surged, with the Topix (TPX) index climbing the most in more than a year, after a rebound in global equities and a report the nation’s pension fund will boost domestic stock holdings…

Japan’s $1.2 trillion Government Pension Investment Fund will increase its allocation target for local shares to about 25 percent from 12 percent, the Nikkei newspaper reported without attribution. GPIF will also boost its holdings of foreign bonds and stocks to about a combined 30 percent from 23 percent, while reducing domestic debt to the 40 percent level from 60 percent, the Nikkei said Oct. 18.

Ah once again pension fund to be used in support of stocks. Yet if the "pump" morphs into a "dump" then the "greater fool" would be the significant population of Japan’s elderly (centenarians at record highs) who will agonize from either pension shortfall or a collapse in purchasing power (as BoJ monetizes welfare deficits). 

Sad to see governments manipulate stocks which will only suffer the population (here welfare recipients) through boom bust cycles.

Oh, by the way, the don’t worry be happy pump comes as Abe’s two cabinet members resigned yesterday.

From the Washington Post: (bold mine)

Two female Japanese cabinet ministers, appointed last month as part of Prime Minister Shinzo Abe’s plan to let women “shine,” resigned their posts Monday amid allegations of financial impropriety.

Their departures undermine Abe’s efforts to lead by example when it comes to promoting working women, and they cast a dark cloud over his administration at a difficult time. The prime minister’s “Abenomics” plan to revive the economy looks to be fizzling out, and he must decide in the next few months whether to press ahead with a hugely unpopular rise in the consumption tax.

“I apologize to all citizens for what happened,” Abe told reporters outside his office Monday afternoon as Trade and Industry Minister Yuko Obuchi and Justice Minister Midori Matsushima resigned within hours of each other.

See “Difficult time” and the “economy looks to be fizzling out” are really good signs for a pump, right? Well no problem, regardless of "fundamentals", stocks are bound to rise forever.

And to see what has caused the resignation of the two ministers, again from the Wapo

The first minister to fall on Monday was Obuchi, a 40-year-old mother of two young children and daughter of a former prime minister, who was widely touted as potentially “Japan’s first female prime minister.” Abe last month promoted her to lead the powerful Ministry of Economy, Trade and Industry (METI), making her one of five women in the newly reshuffled cabinet…

Only six weeks after she was promoted to the cabinet, reports surfaced that her political funds report for 2012, the year of the last general election, did not include revenue and spending on theater tickets for her backers, organized by her support group. There was a gap of about $424,000 in her accounts.

Another support group bought $35,000 worth of goods from businesses run by Obuchi’s sister and brother-in-law, the public broadcaster NHK reported, in violation of political funding laws…

Only a few hours later, Matsushima also submitted her resignation. Shehad been accused of breaking political campaign laws for distributing paper fans during summer festivals.

Hmmm using public office for personal gains...sounds very much like the public choice theory to me.