- Marcel Thieliant, senior Japan economist at Capital Economics
The Bank of Japan surprised market participants by announcing its intentions to increase purchases of exchange-traded funds and prolonging the maturity of bonds it buys to boost investment in the economy. Under the new programme, the central bank will purchase ETFs at an annual pace of 300 billion yen composed of stocks issued by companies "proactively" investing in physical and human capital. The new ETF purchase programme will start in April and will build up the current ETF purchase programme of around 3 trillion yen annually. The central bank said after its December monetary policy meeting it would initially target ETFs that track the JPX-Nikkei 400 index, which features companies that promote transparency and good governance. The BoJ's new ETF program is aimed in part at offsetting the possible market impact of the central bank's sales of stock it has bought from financial institutions since 2002, according to the BoJ statement. It plans to take 10 years to sell those shares at a pace of around 300 billion yen annually.
The BoJ also decided to extend the duration of the Japanese government bonds it buys from 10 to 12 years from 2016. Meanwhile, the central bank held rates steady and said it will stick to its plan to increase the monetary base by 80 trillion annually, as expected.
© Dukascopy Bank SA