TOKYO (Reuters) – The Bank of Japan bought the smallest amount of exchange-traded funds (ETF) in five years on Monday even as shares took a hit from expectations of stricter COVID-19 control measures, a sign the bank is taking a flexible approach in its asset purchases.
The slowdown comes after the BOJ’s decision last month to examine ways to make its policy more sustainable, which could lead to some adjustments to its huge asset purchases.
The BOJ bought 50.1 billion yen ($488 million) of ETFs on Monday, much less than its previous purchase of 70.1 billion yen on Dec. 30 and the smallest single-day total since 2016, market data showed.
“This gives the impression the BOJ may be starting to review the way it buys ETFs, as stock prices continue to rise,” said Shingo Ide, chief stock strategist at NLI Research Institute.
The bank’s purchases of real-estate investment trusts (J-REITs), at 900 million yen, were also the smallest daily sum since 2014.
The BOJ floods markets with cash to keep short-term interest rates around -0.1% and 10-year bond yields around zero. It also buys huge amounts of relatively risky assets such as ETFs as part of efforts to revive growth and achieve its elusive 2% inflation target.
With its holdings exceeding 30 trillion yen, criticism has grown that the BOJ is distorting market pricing and exposing its balance sheet to potential losses.
Such concerns have led to calls from some BOJ policymakers for the bank’s ETF buying to be more flexible.
Japanese shares fell on Monday after Prime Minister Yoshihide Suga said he was considering a state of emergency for Tokyo and surrounding prefectures to contain a surge in local coronavirus infections. ($1 = 102.7400 yen)
(Reporting by Tokyo markets team, writing by Leika Kihara; Editing by Kevin Liffey)
