The Bank of Japan’s head-scratching surge this week came to a halt Friday, as the stock erased earlier gains to fall by its limit.
The shares sank 19%, the most since December 1991, after rising by the daily limit in each of the four previous sessions.
The volatile moves in the shares, or subscription certificates as the BOJ refers to them, has baffled market participants. While the BOJ is unusual in being a listed central bank, the stock pays a tiny dividend and holds no voting rights. In fact, the central bank doesn’t even hold shareholders’ meetings. The stock traded at an all-time low in January.
Usually little noticed or commented on, the central bank’s stock became a topic of conversation at the Diet on Friday, where BOJ Gov. Haruhiko Kuroda was delivering his semi-annual report on currency and monetary control.
"The Bank of Japan’s subscription certificates are completely different from the normal shares of listed companies,” Kuroda said in response to a question about the long-term decline in the stock price during his term prior to this week’s rally. Unlike a normal stock, he said, the share price doesn’t reflect profits or the state of its balance sheet. "The price is not the responsibility of the bank.”
Trading volume on Thursday rose to its highest on record, according to data compiled by Bloomberg, though the 11,600 shares exchanging hands was minuscule compared to most other listed companies in Tokyo. Volume on Friday stood at around 75% of that amount after less than 90 minutes of trading.
While technically a listed entity on the Tokyo Stock Exchange’s Jasdaq, the nature of the stock and its speculative moves are a long-standing mystery of Japan’s financial markets. A speculative surge was also witnessed in late 2012 and early 2013, when optimism over the Abenomics program of former Prime Minister Shinzo Abe was at its peak.
"This isn’t a stock you can evaluate based on fundamentals,” Tomoichiro Kubota, a senior market analyst at Matsui Securities Co., said. "Seeing the BOJ stock dive like today, it looks like the upward climb is done for now.”
The government holds a 55% stake, while individual investors have 40%. The subscription certificates can’t be bought at online securities firms, as they weren’t subject to the 2009 digitalization of traditional paper stock certificates. It’s the only issue for which Japan Securities Clearing Corp. — the entity that clears transactions for all equities in the country — still requires physical delivery of paper certificates, which remain valid even now.
This week's short-lived rally comes after the 225-issue Nikkei 225 average of shares on the Tokyo Stock Exchange briefly touched its highest levels since the bubble era of the 1980s. In those days, when the benchmark traded at around 70 times earnings, some investors collected BOJ stock and framed their certificates as a collectible. They were then worth ¥745,000 apiece.
The moves have come ahead of a closely-watched policy review by the central bank on March 19, which may lead to changes in how it buys exchange-traded funds. As well as being listed, the BOJ is itself the largest single owner of Japanese shares.
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