Bank of Japan Doubles ETF Purchases... Financial Easing in Response to COVID-19

[Image source=EPA Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The Bank of Japan (BOJ) decided on the 16th to expand its exchange-traded fund (ETF) purchase target from the existing 6 trillion yen (approximately 69 trillion won) to 12 trillion yen to mitigate the economic impact caused by the spread of the novel coronavirus infection (COVID-19), and to increase funding supply to financial institutions to provide funds to small and medium-sized enterprises.

According to NHK and other broadcasts, the BOJ held a monetary policy meeting from 12 p.m. on the same day and unanimously decided on additional monetary easing measures focused on funding supply and market stability. This additional monetary easing was implemented for the first time in three years and six months since September 2016.

Specifically, the BOJ doubled the ETF purchase target from 6 trillion yen to 12 trillion yen for this year, and expanded the real estate investment trust (REIT) purchase target from 90 billion yen to 180 billion yen. These measures aim to alleviate the instability of the stock market, which has been experiencing sharp fluctuations.

Additionally, the BOJ increased the corporate commercial paper (CP) and corporate bonds issued by large companies for fundraising by 1 trillion yen each, on top of the current holdings of 2.2 trillion yen and 3.2 trillion yen respectively, and established a system to lend funds to financial institutions at a zero (0) interest rate to support funding for small and medium-sized enterprises.

Originally, the BOJ planned to hold a monetary policy meeting on the 18th and 19th, but the schedule was moved forward as the U.S. Federal Reserve (Fed) suddenly cut the benchmark interest rate by 100 basis points (1 bp = 0.01 percentage point) on the same day, and six central banks including the European Central Bank (ECB) and the Bank of England (BOE) coordinated their actions. This is the first time in nine years since the Great East Japan Earthquake in March 2011 that the monetary policy meeting was held ahead of schedule.

Regarding the current economic situation, the BOJ assessed that "recently, weak movements have continued due to the impact of the spread of COVID-19." The BOJ stated that it will closely monitor the effects of COVID-19 for the time being and will not hesitate to implement additional monetary easing if necessary.

This content was produced with the assistance of AI translation services.