A data release is a reminder of how one of the world's major central banks owns more than half of its domestic ETF and exchange traded products market; the BoJ started the policy, a decade ago.
Japan’s central bank owns almost two-thirds of all the assets invested in exchange traded funds and products in the country, highlighting how Japan’s market for these index-trackers has been heavily influenced by the state.
The Bank of Japan owns 60 per cent of assets in ETFs and ETPs listed in Japan as at the end of November 2021, according to ETFGI, a research and consultancy firm covering trends in the market. ETFs and ETPs listed in Japan sustained net outflows of $3.51 billion during November, bringing year-to-date net inflows to $19.12 billion. Assets invested in the Japanese ETFs/ETPs industry have fallen by 3.7 per cent, from $555 billion at the end of October to $535 billion.
The BoJ started buying ETFs in December 2010 to bolster corporate and household sentiment due to sharp falls in stocks and to support the broader economy. The central bank has remained a big player in the market ever since. Reports have noted how government officials, scholars and market participants have been urging the BoJ to wean itself from the scheme, claiming that it is unsustainable and distorts market pricing. In the US, the Federal Reserve started buying ETFs in the spring of 2020 when markets crashed amid the COVID-19 pandemic. It halted such purchases in July. There are some parallels with central bank quantitative easing – purchases of bonds and other assets to inject fresh money into the economy.
