Equity Purchases by the Bank of Japan Reach a New Milestone
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Equity Purchases by the Bank of Japan Reach a New Milestone

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Bank of Japan Equity Purchases

The Briefing

  • Domestic equities held by the Bank of Japan (BoJ) reached $434 billion in November 2020, the highest value ever recorded on its balance sheet
  • The BoJ began buying equity ETFs (exchange-traded funds) in 2010 to help stabilize its economy
  • The BoJ has now surpassed the country’s Government Pension Investment Fund as the largest owner of Japanese stocks

Equity Purchases by the Bank of Japan Reach a New Milestone

The Bank of Japan (BoJ) increased its equity holdings to $434 billion in November 2020, surpassing Japan’s Government Pension Investment Fund to become the country’s largest holder of domestic stocks.

This milestone will likely capture the attention of global policymakers, as the BoJ is the only central bank to purchase equities—a practice it first began in 2010. These purchases were intended to stabilize the Japanese economy after the 2008 financial crisis, but have carried on ever since.

Why Does the Bank of Japan Purchase Equities?

For decades, Japan has experienced a stubbornly low rate of economic growth relative to its peers. Despite the BoJ’s best efforts to boost growth, this trend has continued after the events of 2008.

YearJapan (% GDP growth)South Korea (% GDP growth)U.S. (% GDP growth)
20104.2%6.8%2.6%
2011-0.1%3.7%1.6%
20121.5%2.4%2.3%
20132.0%3.2%1.8%
20140.4%3.2%2.5%
20151.2%2.8%2.9%
20160.5%2.9%1.6%
20172.2%3.2%2.4%
20180.3%2.9%2.9%
2019 0.6%2.0%2.2%
Average1.28% 🇯🇵 3.31% 🇰🇷 2.28% 🇺🇸

Source: World Bank

No stranger to unconventional policies, the BoJ believes its equity purchases will add a sense of security to the stock market, and as a result, encourage greater levels of investment. Since these purchases began, the Nikkei 225, an index tracking 225 large Japanese corporations, has generated a total return of roughly 160%.

A Drop in the Pond

While $434 billion in equities is by no means a small amount, it pales in comparison to the BoJ’s total assets of $6.7 trillion. This includes $5.1 trillion in Japanese government debt, and $59.4 billion in domestic corporate bonds.

These figures fall in line with other central banks including the U.S. Fed, which currently has $7.4 trillion in assets on its balance sheet. Whether the Fed will also begin purchasing equities, however, remains to be seen.

Where does this data come from?

Source: NLI Research Institute, 2020
Notes: Data as of Nov. 30, 2020.
Figures based on a conversion rate of 1 JPY = 0.0096 USD.

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Seeing Red: Is the Heydey of Pandemic Stocks Over?

Worries over post-COVID demand and rising interest rates have fueled a market selloff, with pandemic stocks hit particularly hard.

Published

2 days ago

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January 21, 2022

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pandemic stocks

The Briefing

  • Global equities are in a downward spiral, and experienced their worst week in more than a year.
  • Worries about slowing post-COVID demand and rising rates fueled the selloff.
  • Pandemic stocks were some of the hardest hit, with Shopify and Netflix dropping 35.3% and 33.5% respectively.

Seeing Red: Is the Heydey of Pandemic Stocks Over?

The stock market, and the stocks that flourished during the COVID-19 pandemic in particular, are off to a rough start in 2022. If you’ve been watching your investment accounts, chances are you’ve been seeing a lot of red. Shaken by the uncertainty of a pandemic recovery and future interest rate hikes, investors have been selling off their stocks.

This market selloff—which occurs when investors sell a large volume of securities in a short period of time, leading to a rapid decline in price—has investors concerned. In fact, search interest for the term “selloff” recently reached peak interest of 100.

2022 market selloff

Which stocks were the hardest hit, and how much are their prices down so far this year?

The Lackluster Returns of Pandemic Stocks

Pandemic stocks and tech-centric companies have suffered the most. Here’s a closer look at the year-to-date price returns for select stocks.

CompanyYear-to-Date Price Return
Shopify-35.3%
Roblox-30.2%
Block-28.0%
Moderna-31.9%
Zoom-19.9%
Netflix-33.5%
Snapchat-31.1%
Peloton-23.1%
Coinbase-23.5%
DocuSign-26.0%
Amazon-16.3%
Robinhood-29.6%

Price returns are in U.S. dollars based on data from January 3, 2022 to January 21, 2022.

Netflix fueled the selloff after it reported disappointing subscriber growth. The company added 8.28 million subscribers in the fourth quarter, which is less than the 8.5 million it added in the fourth quarter of 2020. It also projects to have slower year-over-year subscriber growth in the near term, citing competition from other streaming companies.

Meanwhile, Coinbase stock lost nearly a quarter of its value so far this year. As the price of cryptocurrencies such as Bitcoin have plummeted, investors worry Coinbase will see lower trading volume and therefore lower fees.

The contagion also spread to other pandemic stocks, such as Zoom and DocuSign, as investors began to doubt the staying power of stay-at-home stocks.

Following the Herd

While investor exuberance drove many of these stocks up last year, 2022 is beginning to paint a different picture.

Investors are worried that rising rates will negatively impact high-growth stocks, because it means it’s more expensive to borrow money. Not only that, but they also may see Netflix’s growth as harbinger of things to come for other pandemic stocks.

The psychology of the market cycle also plays a role—amid these fears, investors have adopted a herd mentality and begun selling their shares in droves.

Where does this data come from?

Source: Google Finance

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How People Around the World Feel About Their Economic Prospects

In many of the world’s largest economies, including the U.S., Germany, and China, optimism around economic prospects sits at an all-time low.

Published

3 days ago

on

January 20, 2022

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economic prospects of people around the world

The Briefing

  • Economic prospects are at an all-time low in nine countries, including the U.S., Canada, Germany, Japan, and China
  • China and the U.S. experienced the biggest year-over-year drops, at -8 p.p. and -6 p.p., respectively

How Countries Feel About Their Economic Prospects

Each year, the Edelman Trust Barometer report helps gauge the level of trust people place in various systems of power.

The report is also a useful tool to gauge the general mood in countries around the world—and when it comes to how people in developed economies feel about the near future, there’s a very clear answer: pessimistic. In fact, optimism about respondents’ economic prospects fell in the majority of countries surveyed.

Here’s a full look how many respondents in 28 countries feel they and their families will be doing better over the next five years. Or, put more simply, what percentage of people are optimistic about their economic circumstances?

Country% who are optimisticAll-time low?Change from 2021 (p.p.)
🇯🇵 Japan15%✅-1
🇫🇷 France18%✅-1
🇩🇪 Germany22%✅-2
🇮🇹 Italy27%✅0
🇳🇱 Netherlands29%✅-1
🇬🇧 UK30%+2
🇷🇺 Russia31%+1
🇨🇦 Canada34%✅-1
🇪🇸 Spain36%+1
🇰🇷 South Korea39%+6
🇺🇸 U.S.40%✅-6
🇦🇺 Australia41%-2
🇮🇪 Ireland42%-1
🇸🇬 Singapore43%-1
🌐 Global51%0
🇲🇾 Malaysia55%✅0
🇦🇷 Argentina60%-2
🇹🇭 Thailand60%-2
🇨🇳 China64%✅-8
🇿🇦 South Africa66%-2
🇲🇽 Mexico68%-1
🇧🇷 Brazil73%0
🇸🇦 Saudi Arabia73%0
🇦🇪 UAE78%+6
🇮🇳 India80%0
🇮🇩 Indonesia81%+11
🇨🇴 Colombia83%-1
🇳🇬 Nigeria87%n/a
🇰🇪 Kenya91%-2

Interestingly, nine countries (those with checkmarks above) are polling at all-time lows for economic optimism in survey history.

Whose Glass is Half Empty?

Japanese respondents were the most pessimistic, with only 15% seeing positive economic prospects in the near term. Only 18% of French respondents were economically optimistic.

While most developed economies were slightly more optimistic than Japan and France, all are still well below the global average.

As tensions between China and the U.S. continue to heat up in 2022, there is one thing that can unite citizens in the two countries—a general feeling that economic prospects are souring. As the U.S. heads into midterm elections and China’s 20th National Party Congress takes place, leaders in both countries will surely have the economy on their minds.

Whose Glass is Half Full?

Of course, the mood isn’t all doom and gloom everywhere. The United Arab Emirates saw a 6 percentage point (p.p.) jump in their population’s economic prospects.

Indonesia saw an 11 p.p. increase, and in big developing economies like Brazil and India, the general level of optimism is still quite high.

In some ways, it’s no surprise that people in developing economies are more optimistic about their economic prospects. Living standards are generally rising in many of these countries, and more opportunities open up as the economy grows. Even in the most pessimistic African country surveyed, South Africa, the majority of people still see improving circumstances in their near future. In Kenya and Nigeria, an overwhelming majority are optimistic.

Diverging Outcomes

One major prediction that experts agreed on for the year ahead is that economic outcomes will begin to diverge between countries with differing levels of vaccine access.

While this doesn’t seem to have affected attitudes towards economic optimism yet, it remains to be seen how this will play out as the year progresses.

Where does this data come from?

Source: 2022 Edelman Trust Barometer

Data notes: This data is derived from Edelman’s annual Trust Barometer survey, which includes 30,000+ respondents in countries around the world.

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