Bank of Japan Drops Stock-Buying Target After Market’s Rise
The central bank has become the single largest shareholder in the Tokyo market
TOKYO—The Bank of Japan dropped its annual target for stock purchases Friday, a shift for the central bank after years of building a stock portfolio worth hundreds of billions of dollars.
Since 2016, the Bank of Japan had said it would seek to buy about ¥6 trillion, equivalent to $55 billion, in exchange-traded stock funds annually. In March 2020, when the coronavirus pandemic was developing, it added that it could buy up to twice that amount annually when the market was falling rapidly.
On Friday, it dropped the ¥6 trillion target but reiterated it was ready to step in with larger purchases if needed. It said the higher purchase limit, previously described as a temporary pandemic response, would continue even after the pandemic subsides.
The move came after a rapid rise in stock prices over the past year that has brought the Nikkei Stock Average near a 30-year high. As of March 1, the BOJ’s stockholdings were worth more than $450 billion, according to NLI Research Institute, making it the single largest holder of shares in the Tokyo market.
Some critics including former BOJ officials have said the outsize presence of the central bank is interfering with the independence of the stock market, and they have called on the BOJ to pull back.
Also Friday, the BOJ said the 10-year Japanese government bond yield could move more freely around its zero target. It said it would let the 10-year JGB yield move in a range between minus 0.25% and plus 0.25%, compared with the previous guidance for a band between minus 0.2% and plus 0.2%.
The bank maintained its target for short-term interest rates at minus 0.1%.
It also released measures to ease side effects of the negative interest rate in preparation for future rate cuts.
The pandemic has caused prices to fall and made it unlikely that the BOJ’s 2% inflation target will be achieved soon. Most Federal Reserve officials said earlier this week that they expected the Fed would hold rates near zero through 2023.