USD/JPY Fundamental Daily Forecast – BOJ Stands Ready to Keep Buying ETFs as Needed
A plunge in the Japanese stock market forced the Bank of Japan (BOJ) to buy $644 million in exchange-traded funds (ETF) on Wednesday, more than when it last stepped into the market, underscoring the challenge of dialing back its massive asset-buying program, Reuters reported.
The move comes as BOJ Governor Haruhiko Kuroda, speaking in parliament, stressed the bank’s readiness to keep buying ETFs as needed.
“We have absolutely no plan to unload our ETF holdings. If we were to do so in the future, we must decide on guidelines at a policy-setting meeting,” he said on Wednesday.
The BOJ has come under pressure to dial back its massive ETF purchases, which had helped keep a floor on stock prices but more recently drew criticism for distorting market pricing.
In a review of its policy tools announced on Friday, the BOJ removed a pledge to buy ETFs at a set annual pace and from April decided to step in only when markets face turbulence.
Japanese share prices have been wobbly since then on renewed concerns about COVID-19 lockdowns in Europe, testing the BOJ’s resolve in starting to taper its huge asset purchases.
The BOJ bought 70.1 billion Yen ($644 million) of ETFs on Wednesday, central bank data showed. That was higher than the 50.1 billion Yen the BOJ purchased when it last stepped into the market on Monday.
In total, the BOJ has bought 220.4 billion Yen worth of ETFs so far in March, up from 50.1 billion Yen last month.
Some lawmakers and former central bankers have urged the BOJ to come up with a long-term plan to sell its huge holdings to shield the central bank’s balance sheet from market risk, a move Kuroda has consistently brushed aside as premature.
BOJ’s Kuroda Offers Upbeat View on Japan, Global Economies
Late last week, BOJ Governor Haruhiko Kuroda said on Friday the country’s economy is likely to head toward a sustainable growth path as global trade and manufacturing activity pick up.
But he added that Japan has yet to address key challenges, which were to heighten inflation expectations and prod firms to raise wages.
“Japan’s economy has shown clear signs of recovery in exports and industrial production,” Kuroda told a session of the World Economic Forum. “Our top priority for macro-economic policy continues to be to overcome deflation.”