Japan’s central bank will probably double purchases of exchange-traded funds in a second round of monetary easing under Governor Haruhiko Kuroda anticipated in coming months, a Bloomberg News survey of economists shows.
The Bank of Japan, which tomorrow is forecast to leave unchanged a 60 trillion yen to 70 trillion yen ($586 billion to $679 billion) target for yearly expansion of the monetary base, will increase annual ETF buys to 2 trillion yen in months ahead, according to a survey of 36 analysts. The bank could boost annual bond purchases by at least 10 trillion yen, with July most favored for a policy move.
The Bank of Japan headquarters in Tokyo. (Bloomberg)
While Kuroda pointed to the equivalent of trillions of dollars of financial assets the BOJ could buy before he took the helm in March 2013, the survey signals little change in tactics is likely. Evidence of budding inflation expectations among Japan’s companies may restrain more ambitious plans, such as open-ended ETF purchases, even as the economy slows because of this month’s sales-tax increase.
“Kuroda doesn’t need to move as drastically as in April last year, when he was shifting the economy from deflation,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “By doubling the ETF buys, the BOJ can send a message that it’s there to take action when the economy weakens.”
Unprecedented stimulus that helped weakened the yen 5.5 percent against the dollar over the past year has fueled inflation even as government bond yields remain the world’s lowest, with 10-year debt at 0.64 percent at 10:05 a.m. Monday in Tokyo.
The yen was little changed at 103.21 against the U.S. currency. The Topix index fell 1.1 percent after a selloff in technology shares sent U.S. markets lower.
The central bank’s benchmark price gauge was at 1.3 percent in February, compared with a target of stable 2 percent inflation, and a BOJ survey last month indicated companies see price gains persisting for at least the next five years, marking an end to 15 years of deflation. (Bloomberg)