Thursday, January 3, 2013

Unconventional Measures: "Japan plans 'nationalisation' of factories to save industry"

Remember when, in my naïveté, I would write about, gasp, Central Banks buying equities?
Here's an example from Feb. 2008 (i.e. pre-LEH et al):

Doom and Gloom: What Can the Federal Reserve Do?
...I was reminded of a Financial Times story from March 25, 2002:
Fed Considered Emergency Measures To Save Economy
Minutes which summarized the meeting were released last week. A full transcript will not be available for five years but a senior Fed official who attended the meeting said the reference to "unconventional means" was "commonly understood by academics."
The official, who asked not to be named, would not elaborate but mentioned "buying US equities" as an example of such possible measures, and later said the Fed "could theoretically buy anything to pump money into the system" including "state and local debt, real estate and gold mines – any asset"....
...The question arises "Can the fed intervene in the Equities Markets?"
Again, two answers. 1) It's definitely something Central Bankers have thought about. 2) The Fed may need some enabling legislation which they would probably get if they requested it.
The FT reported February 21, 2002 "Japan Suspected of Stock Market Intervention".
A Google search finds 700 references to the "Stock Buying Body".
Here's a pungent one:
"We must halt this fall in shares. It's like diarrhea, we must stop it. The stock-buying body was set up precisely to absorb such selling (offloading of cross-shareholdings by banks). If February is such a month, there is no excuse for not functioning at that crucial time."Finance Minister Masajuro Shiokaw – Feb 7
More relevant to the American markets are a couple Fed papers, the first of which is astounding for its frankness:
Monetary Policy When the Nominal Short-Term Interest Rate is Zero. 
That was back when I cared what Central Banks did. Since the recent unpleasantness there has been no nuance and no reason for me to comment on what's up in Banker-land as it would have been the same story every post for the last 205 weeks.

Here however, here is a new wrinkle.
Once again the Japanese are the trailblazers, this time it's the central government rather than the Central Bank.
From The Telegraph:
Japan's government is to take the unprecedented step of buying factories and machinery directly with taxpayer funds, the latest in a series of radical steps to lift the country out of its deep slump. 

Premier Shenzo Abe is to spend up to one trillion yen (£7.1bn) buying plant in the electronics, equipment, and carbon fibre industries to force the pace of investment, according to Nikkei news.
The disclosure came just a day after Mr Abe vowed to revive Japan's nuclear industry with a fresh generation of reactors, insisting that they would be "completely different" from the Fukishima Daiichi technology.
The industrial shake–up shows the ferment of fresh thinking in the third–largest economy after years of paralysis. Output shrank 0.9pc in the third quarter and industrial production has fallen 3.3pc over the past two months, made worse by a boycott of Japanese goods in China over the Diaoyu/Senkaku islands row. Exports to China fell 38pc in November.
Mr Abe's Liberal Democrats have already lambasted the central bank, threatening a new bank law unless it adopts radical measures to pull Japan out of deflation – including a growth target of 3pc for nominal GDP, implying massive monetary stimulus.
He has set an implicit exchange range target of 90 yen to the dollar, instructing the Bank of Japan to drive down the yen with mass purchases of foreign bonds along lines pioneered by the Swiss.

Finance minister Taro Aso brushed aside warnings that naked intervention would anger trade partners and damage Japan's strategic alliance with the US. "Foreign countries have no right to lecture us," he said, accusing the West of failing to abide by a G20 pledge in 2009 to forgo competitive devaluations. ...MORE

July 2008 
Federal Reserve: Send in the Helicopters, No GSE Left Behind (FNM; FRE)

Feb 2008 
Depression risk might force U.S. to buy assets

July 2012 
Tipping Point: Largest Japanese Pension Fund Begins Selling Japanese Government Bonds

Aug 2012 
Follow-up to Tipping Point: Largest Japanese Pension Fund Begins Selling Japanese Government 

Nov 2012
Bank of Japan Might Become the First Central Bank in the World to Introduce NGDP Targeting

Sept 2012 
Fed Announces New All-time Highs for Equities and Higher Prices for Precious Metals.

Dec 2012 
Japan's Nikkei is In the Early Stages of an Historic Move