Bank of Japan Continues ETF Purchases While Maintaining Other Levers

The Bank of Japan has increased its purchases of exchange-traded funds to ¥6 trillion, up from ¥3.3 trillion, as part of an effort to further ease monetary policy and stimulate the economy amidst ongoing downside risks. However, the central bank has decided to maintain its other policy measures.

In a statement, the Bank of Japan expressed confidence that its monetary policy actions combined with government initiatives will create positive synergies for the economy.

While there had been speculation regarding a potential reduction in the negative interest rate from the current level of -0.1% on certain deposits, the Bank of Japan opted to keep this rate unchanged, as well as the current asset purchase pace at ¥80 trillion annually.

Additionally, Prime Minister Shinzo Abe recently announced a substantial ¥28 trillion stimulus plan, although reports indicate that the government may allocate only up to ¥7 trillion in direct fiscal stimulus.

Despite this, there remains speculation that the Bank of Japan could face increasing pressure to further lower interest rates into deeper negative territory. On Friday, Governor Haruhiko Kuroda instructed staff to assess the potential impacts of such negative rates.