Kuroda says BOJ will seek ways to make ETF buying more effective

Bank of Japan Governor Haruhiko Kuroda said the central bank is already buying exchange-traded funds (ETF) flexibly, but will seek ways to make the programme more effective and sustainable in a scheduled review of its policy tools in March.

Kuroda said the BOJ is mindful of the need to address the side-effects of its massive stimulus, adding that he was aware of criticism its ETF purchases were distorting stock prices.

But he offered few clues on what tweaks the BOJ could make to the asset-buying programme, and said he saw no sign its ETF buying was causing huge market disruptions or serious corporate governance problems.

“We’re already buying ETFs in a nimble and flexible manner,” Kuroda told parliament on Wednesday.

“The BOJ’s various tools, including its ETF buying, will be the target of the March review,” he said. “We’ll examine how our tools are affecting markets and look at what we can do better.”

The BOJ will conduct a review of its policy tools in March to make them more sustainable, as the COVID-19 pandemic heightens the chance of a prolonged battle to reflate growth.

The move comes amid heightening criticism that the BOJ’s asset purchases is drying up market liquidity and distorting stock prices.

On the BOJ’s government bond buying, Kuroda said it has recently slowed substantially as markets remain calm.

He also said the average duration of the central bank’s government bond holdings remained stable at around seven years.
Source: Reuters (Reporting by Leika Kihara; Editing by Kevin Liffey & Simon Cameron-Moore)