TOKYO (Reuters) – The Bank of Japan may put in place some numerical guidelines for buying futures currencies (ETFs) with a promise to ramp up buying when markets come volatile, three sources familiar with its thinking said.
The move would allow the BOJ to make slower purchases when markets are stable, while at the same time reassuring investors that it will step in strongly when shock events trigger a recession, he said. them.
While there is no consensus on the final decision, the idea is among options to emerge within the BOJ ahead of a review of its policy instruments due in March, the sources told Reuters.
“Numerical instructions have advantages, although they are also binding,” said one of the sources, noting that it was possible to remove some of the numerical instructions.
“To stabilize a BOJ policy, it must avoid over-purchasing an ETF when doing so unnecessarily,” said another source, a comment taken by a third source.
The BOJ will review its tools at next month’s policy meeting to make their major stimulus program “more sustainable and effective,” as COVID-19 pandemics increase the there is the prospect of a long struggle to revive the economy.
The BOJ has been buying ETFs for a decade as part of efforts to pull Japan out of deregulation.
It now promises to buy ETFs at an annual rate of about 6 trillion yen ($ 56.7 billion) and up to 12 trillion yen, a promise that will keep them buying even when stock prices thrive.
Many BOJ policymakers want to make the ETF buying program more sophisticated, so that it can buy smaller amounts or even stop buying when markets are calm, the sources said.
Some are warming to the idea of removing the 6-trillion-yen target or the 12-trillion-yen cap, a move that would give the BOJ a free hand in slowing down purchases, he said. them.
Others, however, say that the release of the numerical guidance could intimidate investors and encourage stock market sales at a time when many Japanese companies are closing their books. -fiscal year in March.
The BOJ will try to clarify that it would cancel a purchase in non-critical times, so it has an opportunity to buy aggressively when markets turn volatile, the sources said.
The central bank will look at a number of ideas before reaching a final decision at the March 18-19 policy meeting, which could trigger a market move at the time, they said.
($ 1 = 105.7400 yen)
Reciting with Leika Kihara and Takahiko Wada; Edited by Toby Chopra