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Bank of Japan to Continue Bond Purchases at Torrid Pace

Friday, October 21, 2016 8:17
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Japan flagBank of Japan Governor Haruhiko Kuroda said today that there’s no need to taper the central bank’s massive asset purchases, even as it adjusts its focus toward controlling interest rate yield curve.

Still, Kuroda didn’t rule out trimming the central bank’s purchases in the future. From Bloomberg:

Responding to questions in parliament, Kuroda acknowledged that it may not be necessary in the future to continue buying Japanese government bonds at the current pace of 80 trillion yen ($770 billion) annually.

Last month, the BoJ unveiled its new plan to revive Japan’s struggling economy. The bank said then that it would maintain bond purchases, boost its ETF purchases, and take unknown measures aimed at “yield curve control.”

Not everyone believes the BoJ is not tapering its purchases, however:

Some economists said the new framework would enable the BOJ to reduce its asset purchases without confirming that it was tapering. Among them is former BOJ board member Sayuri Shirai, who said Friday that the BOJ’s policy shift signaled a tightening of monetary policy and a tapering of bond purchases.

“The characteristics of the policy announced in September are implicit tapering,” she said in a press conference in Tokyo, adding that there was “no room for objection” to this view.

Japan is mired in a decades-long economic slump fueled by demographic changes and the decline of its technology companies as world leaders. Regulators have taken unprecedented steps to try and restore growth, but the country still lags behind the BoJ’s 2% inflation target.

The iShares MSCI Japan ETF (NYSE:EWJ) fell $0.03 (-0.28%) to $12.53 per share in Friday morning trading. Year-to-date, the largest exchange traded fund focused on Japanese equities has risen 3.42%.


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