Bank of Japan adamant asset-buying has boosted economy 

Governor says there’s no plan to 'permanently reduce' its exchange-traded funds buying policy which he says has propped up prices and staved off the worst effects of the global pandemic 

by Sean OMeara
Bank of Japan adamant asset-buying has boosted economy 
Bank of Japan Governor Haruhiko Kuroda denied claims its ultra-loose policy was fuelling an asset price bubble.

Japan's central bank has dismissed calls to scale down its purchases of exchange-traded funds (ETF), arguing the policy has had a positive effect on its Covid-hit economy as the country’s stocks rose to a 30-year high.

The bank’s governor stated on Tuesday its upcoming policy review will not lead to a radical change in its asset-buying scheme and it was premature to debate an exit from the central bank's super-loose policy as the pandemic continued to spread.

"Our ETF buying has had a positive impact on the economy and prices. We don't have any plan to end or permanently reduce our purchases," Haruhiko Kuroda said. "We'll look into ways to address [the side-effects] at our March review," he said.

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The BoJ Governor also said the recent stock price rally reflected market optimism over the global economic outlook, brushing aside views its ultra-loose policy was fuelling an asset price bubble.

"Optimism over the global economic outlook and steady vaccine roll-outs may be behind the recent surge in stock prices," Kuroda told Japan’s parliament.

"But the global outlook remains highly uncertain," he said.

Japan's stocks rose to a 30-year high on Tuesday in line with a global market rally reflecting hopes of big stimulus and steady vaccine rollouts.

POLICY TOOLS

The BoJ has unveiled a plan to review its policy tools, including its ETF-buying programme, in March to make it more sustainable as the Covid-19 pandemic forces it to maintain its stimulus for a prolonged period.

Kuroda said the review would address the side-effects of prolonged easing, as the hit to growth from the pandemic may keep his 2% inflation target out of reach for years.

"It may be difficult for inflation to reach 2% in 2021, 2022 and even 2023," Kuroda said. "It's not as if our efforts have had no effect. But we need to do more, given the fact inflation hasn't reached 2% despite eight years (of easing)," he said.

  • Reporting by Reuters

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