BoJ Expands ETF Buying

The Bank of Japan kept its pledge to increase the monetary base at an annual pace of about 80 trillion yen and left the interest rate unchanged at -0.1 percent at its July 2016 meeting. Policymakers also decided to increase the annual exchange-traded equity funds purchase target to JPY 6.0 trillion from the previous JPY 3.3 trillion.

The BoJ said it takes additional monetary easing in order to prevent uncertainties stemming from the U.K's decision to leave the European Union and the slowdown in emerging economies. The decision was taken by 7-2 majority vote.

The bank also decided upon the following:

1. Increasing  the size of lending program to USD24 billion (about JPY2.5 trillion) from the previous USD12 billion to ensure smooth funding in foreign currencies by Japanese firms and financial institutions. Maximum loans to each counterparty expands to USD2 billion from the previous USD1 billion. 

2. Establishing a new facility for lending securities to be pledged as collateral for the USD Funds-Supplying Operations.

Regarding the guideline for money market operations, the bank decided to leave them unchanged.

The Policy Board also decided by an 8-1 vote to purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at an annual paces of about JPY3.3 trillion and about JPY90 billion, respectively. As for CP and corporate bonds, the Bank will maintain their amounts outstanding at about 2.2 trillion yen and about 3.2 trillion yen respectively. 

Excerpts from the Statement by the Bank of Japan: 

The bank of Japan believes that these monetary policy measures and the government's initiative will produce synergy effects on the economy.

The bank will continue with "QQE with a Negative Interest Rate", aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will examine the risks to economic activity and prices, and take additional easing measures in terms of threee dimensions -- quantity, quality and the interest rate -- if it is judged mecessary for achieving the price stability target.

Due to considerable uncertainties over the outlook for prices against the background surrounding global financial markets, the bank will conduct a comprehensive assessment of the developments in economic activity and prices under "QQE and QQE with a Negative Interest Rate" as well as these policy effects at the next Monetary Policy Meeting.

In a separate release on a quarterly review of its long-term economic projections, the Bank of Japan slashed the country's real GDP for 2016 to 1.0 percent from an earlier projection made in April of 1.2 percent. Core consumer prices forecasts were also cut to 0.1 percent from 0.5 percent.

BoJ Expands ETF Buying

Bank of Japan l Rida Husna |
7/29/2016 11:13:45 AM