Outside the Bank of Japan (BOJ) headquarters in Tokyo on Sept. 14.

Photographer: Kiyoshi Ota/Bloomberg

The Bank of Japan’s escalating presence in almost every corner of the nation’s financial markets threatens to further distort activity and complicate any future pulling back from stimulus.

The central bank’s growing pile of assets has now reached the equivalent of 137% of gross domestic product, according to a Bloomberg calculation based on official data. In dollar terms, the tally of securities, loans and other assets is just 8% smaller than the Federal Reserve’s even though the U.S. economy is four times bigger than Japan’s.

While economists laud the relative success of the BOJ’s measures to support businesses and the economy through the Covid-19 crisis, many of them also warn that accelerated growth in the bank’s asset mountain will be hard to scale back in the future without unnerving investors and shocking loan-dependent companies and policy makers.

With its array of corporate debt and commercial paper quickly building, the BOJ’s “whale in the pond” presence is also spreading beyond government bonds and stock funds to distort other markets and further crowd out private investors.

“It’s like the BOJ has created an intensive care unit and wheeled everybody inside. It’s so comfortable on the drip feed that no one wants to leave,” said Takahiro Sekido, chief Japan strategist at MUFG Bank Ltd.

BOJ's asset haul is larger than Fed's by the size of an economy

The BOJ aggressively ramped up its lending and asset buying in March as the looming scale of the pandemic spread jitters among investors and businesses.

Given the already bloated size of the BOJ’s assets, the pace of increase appeared smaller in scale than its global peers, especially compared with the Federal Reserve. That partly reflects the Fed’s efforts to trim back earlier stimulus, something the BOJ was unable to do and

(Bloomberg) — Oil clung to losses after U.S. government data showed the first crude stockpile gain in four weeks, adding to concerns over a demand recovery with stimulus talks in limbo.

Loading...

Load Error

Futures in New York fell as much as 3.4% on Wednesday. An Energy Information Administration report showed domestic crude inventories increased 501,000 barrels last week, while supplies at the nation’s biggest storage hub at Cushing, Oklahoma, climbed to the highest level since May.

At the same time, U.S. President Donald Trump’s decision to suspend fiscal relief talks until after the election is casting further doubt on energy demand bouncing back amid the pandemic. Reopening plans around the world are being thrown into question as global cases top 35 million.

This ended a trend of “fairly large declines,” said Rob Thummel, a portfolio manager at Tortoise, a firm that manages roughly $8 billion in energy-related assets. “There continues to be uncertainty associated with domestic demand and the need for fiscal stimulus to continue to boost the economy and correspondingly boost demand for crude oil.”



chart: U.S. crude inventories rise for the first time in four weeks


© Bloomberg
U.S. crude inventories rise for the first time in four weeks

Oil’s retreat follows two sessions of gains, lifted by a workers’ strike in Norway and Hurricane Delta spurring Gulf of Mexico operators to shut output. Still, without a U.S. virus relief package, the demand outlook has only become dimmer. Governments around the world are trying to control the spread, with Brussels and Bucharest becoming the latest European capitals to impose restrictions on nightlife.

Trump in a series of Tuesday-night tweets called on Democrats to pass standalone bills. While House Speaker Nancy Pelosi signaled openness to a standalone airline relief bill in a telephone conversation with Treasury Secretary Steven Mnuchin on Wednesday, it is a far cry from the Democrats’ $2.2 trillion