Bank of Japan worried about a stock market crash

No central bank of a developed country equals the Bank of Japan in trying to manipulate the stock market up by buying equities.The BoJ has done this for years.With breath-taking ineffectiveness. So on July 28, the BoJ announced another stock market pump-up scheme: it would nearly double its annual purchases of equity ETFs (exchange traded funds) from about 3.3 trillion yen to 6 trillion yen ($60 billion).

Hedge funds and other speculators expected for the BoJ to instantly throw its weight around in the stock market, and hopes were riding high that the Nikkei would surge, or at least rise in visible manner. Alas, on Friday in Tokyo, the Nikkei dropped to 16,361, down a smidgen from where it had been on July 28.

The debacle was right in line with the BoJ's prior stock-market pumpup schemes. While it managed with its negative interest rate policy to totally kill off all money market funds in Japan, with the last 11 shuttering earlier this year, and while it managed with its gigantic purchases of Japanese government bonds to completely freeze up the JGB market, the BoJ has failed to accomplish much of anything in the stock market.

The Nikkei stock index is down 21% from its recent peak in June last year, and is down 57% from its all-time peak in 1989.

But nearly doubling the ETF purchases should have done something. So why did the highly anticipated pump-up-scheme rally flop? It seems the BoJ is worried about a stock market crash, triggered by Fed tightening, and has decided to keep its power dry to be able to put a floor under plunging stocks later this year.

According to the Nikkei Asian Review, the BOJ purchased ETFs on only three days in August through Wednesday: August 3, August 4, and August 10, totaling 176 yen billion.