Tokyo Market View by Masataka Maeda
By Masataka Maeda
Japan Center for Economic Research
BOJ's Share Price Soaring -- But Can It Last?
(Tue, Mar 26, 2013)
Few people other than stock investors are likely aware that the Bank of Japan is traded on the Jasdaq stock exchange. And probably even fewer still know that the BOJ's share price as of Tuesday had tripled from the day former Prime Minister Yoshihiko Noda called for a general election in November last year.
Unlike most listed companies, the BOJ does not have an investor relations page full of detailed financial information on its Website. Instead, its site merely explains that it is capitalized at 100 million yen in accordance with the Bank of Japan Act, and that about 55% of the capital is subscribed by the government.
But investors can easily check the bank's share price by entering the numbers 8301 -- the BOJ's securities code -- in the search box of their tablets or smartphones. On Tuesday, such a search found that 90,900 yen was the closing price that day.
Different From The Rest
Unlike ordinary shares of private companies, BOJ shares do not come with voting rights or enable entry to a general shareholders meeting. Indeed, the bank never holds such meetings. The BOJ governor and executive directors are appointed without shareholders' consent.
Legally, the BOJ does not issue shares but rather subscription certificates. Holders have a right to receive an annual dividend, which is only 5 yen per share and never fluctuates. Investors in the stock are motivated largely by the hope of making capital gains.
Any investor can buy and sell the bank's shares, but the bank issues only 1 million, and the minimum trading unit is 100 shares. Investors have no way of knowing what percentage of the total shares are in the floating stock portion, because the names of the shareholders, with the exception of the Finance Ministry, are never disclosed.
However, considering that it is rare for more than 5,000 BOJ shares to be traded even on the most active days, the number of floating shares must be very small. Because of this, online brokers usually do not accept buy and sell orders.
Like A Rocket
The share price has nevertheless tripled since Nov. 14 last year, when the closing price was 30,500 yen, a 30-year low. The intraday high on Tuesday was 94,000, the highest since the Lehman Brothers collapse in September 2008.
Over that same period after Nov. 14, the Nikkei 225 climbed 45% amid high hopes for Prime Minister Shinzo Abe's economic initiative -- the fastest postwar jump in the benchmark index after the one logged in 1952. But the BOJ has outperformed even that impressive accomplishment.
This is partially due to expectations of further inflows of funds to the stock market. So-called liquidity-driven rallies often push up the share prices of financial institutions, and the BOJ is no exception.
Another reason for the stock surge are the high expectations for the new central bank governor, Haruhiko Kuroda, who took office Wednesday. The former president of the Asian Development Bank replaced Masaaki Shirakawa, who resigned the previous day.
Shirakawa pursued a disciplined monetary policy, but it failed to ignite the economy. Market participants expect the new BOJ leadership to pursue more-aggressive monetary easing under its stated goal of achieving a 2% inflation target.
Kuroda's strong commitment to the inflation target may help win back confidence in the central bank's monetary policy for at least the short term. But executing monetary easing in the real financial market is often not as easy as envisioned. If the push to exit deflation takes longer than the new BOJ chief is aiming for, the confidence may fade and the bank's stock price may peak.
Masataka Maeda is a Senior Economist in Japan Center for Economic Research (JCER).
Born in 1957. In 1979, he graduated from the College of Arts and Sciences, the University of Tokyo, and joined Nikkei Inc.. From 1991 to 1994, he was assigned as a correspondent at the Washington D.C. Bureau in the United States. From 1997 to March 2010, he was a Senior Staff Writer in the area of capital market and corporate news. Since April 2010, he has worked at JCER.
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