BOJ likely in no mood yet to aid market with bigger ETF buying – Reuters
|The Bank of Japan (BOJ) will refrain from exchange-traded funds (ETF) buying despite the tumbling Japanese stocks, as the current rout likely falls short of new thresholds set in March for its ETF purchases, Reuters reports, citing findings unveiled by the central bank.
Key takeaways
“A closer look at an analysis the BOJ released in March in tandem with the new guidelines show the hurdle for buying ETFs has risen significantly and focuses not just on the degree of price falls but on volatility.”
“With estimates using two indicators - equity risk premium implied by option prices and yield spreads - the BOJ concluded that "the more volatile the market and the larger the size of purchases, the larger the effects of ETF purchases."
“The analysis also pointed to survey results showing its ETF buying has a more positive effect "during periods of market instability," such as the Brexit shock in 2016 and last year's coronavirus pandemic-triggered rout.”
"It's effective to buy huge sums when markets are severely unstable,” signalling that it would take a crisis like last year's market crash to justify huge ETF purchases.
Market reaction
USD/JPY ignores the BOJ headlines, as it remains at the mercy of the US dollar dynamics ahead of the US CPI.
The spot currently trades at 108.78, up 0.15% so far.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.