One problem with prolonged quantitative easing by a central bank is not just that financial markets become distorted but economies also become distorted.
Bloomberg reports that the Bank of Japan is set to become the top shareholder in Japanese companies.
Already a top-five owner of 81 companies in Japan’s Nikkei 225 Stock Average, the BOJ is on course to become the No. 1 shareholder in 55 of those firms by the end of next year, according to estimates compiled by Bloomberg from the central bank’s exchange-traded fund holdings. BOJ Governor Haruhiko Kuroda almost doubled his annual ETF buying target last month, adding to an unprecedented campaign to revitalize Japan’s stagnant economy.
This poses risks for the economy.
“The BOJ being a stable shareholder of such a large ratio of stocks is going to make investors question if governance is being held to account, and the debate around this is going to get more aggressive as they increase holdings,” Sumitomo Mitsui’s Ichikawa said. “People are going to question how long the BOJ should keep this policy going.”