The Bank of Japan announcement that it would purchase part of the stakes that banks hold in listed companies has raised question marks among investors.
The stock market greeted the good news with a spectacular rise. This was all the more impressive as stock markets elsewhere ended the day with another miserable performance. On the other hand, both the yen and government bonds dropped sharply after the announcement.
The BOJ initiative closely follows a decision by the Development Bank of Japan, a public institution, to purchase credit-linked securities issued by large commercial banks that need to trim their balance sheets. Hence, in just a few days, the authorities have arranged all conceivable means of propping up the banking system.