BOJ eases policy by doubling ETF buying, underwhelms expectations

Fri Jul 29, 2016 4:53am EDT
 
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By Leika Kihara

TOKYO (Reuters) - The Bank of Japan expanded stimulus on Friday by doubling purchases of exchange-traded funds (ETF), yielding to pressure from the government and financial markets for bolder action, but disappointing investors who had set their hearts on more audacious measures.

The central bank, however, said it will conduct a thorough assessment of the effects of negative interest rates and its massive asset-buying program in September, suggesting that a major overhaul of its stimulus program may be forthcoming.

BOJ Governor Haruhiko Kuroda said the bank was conducting the review not because its policy tools have been exhausted but to come up with better ways to achieve its 2 percent target - keeping alive expectations of further monetary easing.

"I don't think we've reached the limits both in terms of the possibility of more rate cuts and increased asset purchases," Kuroda told reporters after the policy meeting.

"We will of course consider what to do in terms of monetary policy steps, based on the outcome of the assessment."

At the two-day rate review that ended on Friday, the BOJ decided to increase ETF purchases so its total holdings increase at an annual pace of 6 trillion yen ($58 billion), up from the current 3.3 trillion yen. The decision was made by a 7-2 vote.

But the BOJ maintained its base money target at 80 trillion yen, as well as keeping to the existing pace of purchasing other assets including Japanese government bonds.

It left unchanged the 0.1 percent interest it charges on a portion of excess reserves that financial institutions park with the central bank.   Continued...

 
Bank of Japan (BOJ) Governor Haruhiko Kuroda attends a news conference at the BOJ headquarters in Tokyo, Japan, July 29, 2016.   REUTERS/Kim Kyung-Hoon