BOJ should restrain ETF buying when markets calm, says board member Suzuki By Reuters

© Reuters. FILE PHOTO: A man wearing a protective mask walks past the headquarters of Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon

By Leika Kihara

TOKYO (Reuters) – The Bank of Japan should restrain its purchases of exchange-traded funds (ETF) when markets are calm to prevent its holdings from increasing as much as possible, board member Hitoshi Suzuki said on Wednesday.

In a review of its policy tools in March, the BOJ ditched a numerical target on the pace of its purchases of ETFs and real-estate trust funds (REIT) as part of efforts to make its massive stimulus programme more sustainable.

“It’s important to be mindful of the BOJ’s financial health in buying ETFs and REITs,” Suzuki said in a speech. “As the BOJ’s holdings increase, the impact on its financial health becomes bigger,” he added.

A former commercial banker, Suzuki also said the BOJ must ensure Japan’s banking sector is sound in order to make its monetary easing sustainable.

Under a policy dubbed yield curve control, the BOJ guides short-term interest rates at -0.1% and pledges to cap long-term rates around zero. It also buys government bonds and risky assets such as ETFs to revive the economy.

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