Buy ETB BOJ without moving markets away, Kuroda says

TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda on Wednesday reiterated criticism that the central bank’s purchase of a commercial exchange-traded fund (ETF) was disrupting markets, suggesting it would not significantly change his current asset purchase program.

Kuroda also said that the ETJ ‘s ETF holdings were likely to receive unrealized profits of around 12-13 trillion yen ($ 116 billion-125 billion) as a result of recent rises in Tokyo stock prices.

“I do not think our ETF purchase is moving the Tokyo stock market,” Kuroda told parliament, when a counter-attorney asked about the possible side effects. in addition to buying property.

“We are buying ETFs as part of a wider discount framework. We now have no plans to finalize the framework or purchase our ETF, ”he said.

A rough estimate shows that the market value of the central bank ‘s ETF holdings will not fall below book value unless the average Nikkei stock in Tokyo slips below 21,000, he said. The Nikkei stood at about 28,628 Wednesday.

The BOJ is currently pledging to purchase up to 12 trillion yen of ETFs annually as part of their major incentive program.

The purchases have recently drawn criticism from investors and some lawmakers, who say it is pushing stock prices and exposing the BOJ’s balance sheet to excessive market risk.

Its holdings are now around 35 trillion yen, making up about 80% of the Japanese ETF market.

But despite years of buying, the BOJ owns only about 7% of the total shares listed in the Tokyo Stock Exchange, Kuroda said, playing down concerns that it was gaining control. on the market.

“The frequency of our ETF purchases has dropped dramatically recently, as has the volume of each purchase,” Kuroda said. “We buy flexibly looking at market developments.”

With coronavirus pandemic seen as having to sustain its stimulus program for years to come, the BOJ will review its policy tools to make them more “sustainable and effective” in a forthcoming study. come in March.

Sources have told Reuters that the BOJ will not make major changes to its asset purchase schemes, but discuss ways to dial back ETF purchases without allaying market fears of withdrawal from ultra policy -discharged.