The central bank said it would purchase about 56.7 billion US dollars worth of exchange-traded funds per year, up from a previous 31 billion dollars. But it kept its base money target at 80 trillion yen (£500 billion).
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The bank has been buying assets like exchange-traded funds (ETFs), but already holds around a third of Japan’s market for government bonds (JGBs).
The BOJ made a decision to increase ETF purchase at the end of its two-day rate review on Friday.
“The Government is undertaking fiscal and structural policy initiatives, including a large scale “stimulus package, ‘ which is now being compiled”. “Increasing ETF purchases makes no contribution to achieving 2 percent inflation”.
The central bank, however, did say it will be conducting a thorough assessment of the effects of negative interest rates and its massive asset-buying programme at its next policy meeting in September, suggesting that a major overhaul of its stimulus measures may be forthcoming.
Societe Generale’s strategist Kit Juckes called the changed a “damp squib”.
The latest national consumer inflation data was slightly weaker than expected at -0.5% for June, while the Bank of Japan’s core inflation reading was unchanged at 0.8% for the month compared with the 2.0% target.
“The BOJ seems to have had no choice but to ease policy this time as markets had factored in fresh stimulus measures significantly”. Although the Nikkei’s initial fall was stabilised by the financial sector. Investors were relieved that the BOJ didn’t further cut rates, which have eaten into the profit margins of Japanese banks.
The yen rose sharply.
“The market had expected more than what the BoJ announced today, which triggered some disappointment and led to the yen’s surge”, said Yosuke Hosokawa, head of the forex sales team at Sumitomo Mitsui Trust Bank. It was at 104.58 just before.
OIL: In energy trading, benchmark US crude fell 39 cents to $40.75 on the New York Mercantile Exchange.
The pressure on the bank increases further as the Ministry of Finance is lobbying for the BOJ to further ease policy. Japan’s economy minister urged the bank to work with Tokyo to spur growth.
The Japanese government unveiled a surprisingly large 28 trillion yen ($267.58 billion) stimulus package on Wednesday but sources told Reuters on Thursday that the government package contains direct fiscal spending of only 7 trillion yen, also likely to disappoint investors.
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The US economy grew far less than expected in the second quarter as inventory investment fell for the first time in almost five years, data out on Friday showed.
