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Bank of Japan Considers Suspending ETF Purchases and Normalizing Policy: Latest Updates

The Bank of Japan will consider completely suspending new purchases of exchange-traded funds (ETFs), which it has continued to do since 2010, when it reaches its 2% inflation target and begins to normalize policy. This was revealed through interviews with multiple parties involved.

According to people familiar with the matter, with the stock market hovering at an all-time high, the Bank of Japan has determined that there is little need to support stock prices by increasing the risk premium through ETF purchases.

Similarly, when considering abolishing or reviewing yield curve control (YCC) during the normalization phase, the Bank of Japan plans to avoid sudden fluctuations in long-term interest rates by continuing to purchase government bonds, etc., sources said. This can be said to be a contrasting response to the stock market.

The Bank of Japan purchased ETFs three times last year, totaling only 210 billion yen, but none this year. On the 11th, the Tokyo Stock Price Index (TOPIX) fell by more than 2%, which the market had seen as a guideline, but no purchases were made. With the Nikkei Stock Average hitting a new all-time high and the Bank of Japan becoming the largest holder of Japanese stocks, further purchases are likely to be questioned by investors.

The market may already be used to the Bank of Japan being cautious about ETF purchases, people familiar with the matter said.

Regarding ETF purchases, Governor Kazuo Ueda said in a parliamentary statement in February that once the current large-scale monetary easing becomes possible to review, “we will consider whether it is a good idea to continue it, including other measures.” comment. Deputy Governor Shinichi Uchida said in a February speech that, “When we revise large-scale easing, it would be natural to stop purchasing J-REITs,” including real estate investment trusts (J-REITs).

The purchases of ETFs and J-REITs began as part of the “comprehensive monetary easing policy” introduced in 2010 by former Governor Masaaki Shirakawa. The Bank of Japan is the only major central bank that purchases ETFs. Under the extraordinary easing by former Governor Haruhiko Kuroda, the amount has been increased repeatedly, and the current purchasing policy is to cap annual purchases at approximately 12 trillion yen for ETFs and approximately 180 billion yen for J-REITs, and “purchases will be made as necessary.” ”.

According to market estimates, the market capitalization of ETFs owned by the Bank of Japan was approximately 70 trillion yen as of last month, roughly equivalent to the national tax revenue.

The Bank of Japan is likely to hold a more in-depth discussion on the pros and cons of lifting negative interest rates at its monetary policy meeting to be held on the 18th and 19th. Based on the tally of responses to the first round of spring labor to be released by the Rengo on the 15th, it will be determined whether this month’s cancellation is appropriate.

Bank of Japan debates whether to lift negative interest rates, makes decision based on Shunto data – related parties

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2024-03-13 09:15:06
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