Japan ETFs Unimpressed by BOJ | ETF Trends

The Bank of Japan announced Friday that it will maintain the quantitative easing program and increase purchases of Japanese equities through exchange traded funds. However, market observers were unimpressed by the extended measures to combat a prolonged growth stunt.

Japanese equities weakened Friday, with the Nikkei 225 index falling 1.9% to 18,986.8, after the BOJ announced adjustments to its stimulus measures, including plans to for acquiring ¥300 billion, or $2.45 billion, in ETFs, reports Leika Kihara for Reuters.

BOJ Governor Haruhiko Kuroda argues that the small changes will allow the central bank to sustain or expand stimulus more easily. However, observers are not convinced.

“This is the type of incremental move that Kuroda previously said he opposes,” Hiroshi Shiraishi, senior economist at BNP Paribas Securities, told Reuters. “It suggests that the BOJ has reached the limit of its current quantitative easing and that it cannot expand easing by a large amount.”

After the country’s long struggle to stimulate inflation and growth, the small policy changes cast doubt on the central bank’s effectiveness to bolster the economy.

“The BOJ had never imagined that it would need to continue with QQE for this long,” Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley, told Reuters. “Today’s step marks a shift from shock therapy to a long drawn-out struggle in its efforts to achieve 2 percent inflation.”

The BOJ’s move is seen as a way to pressure companies into shifting  more of their record profits to wage hikes and new investments to help counter deflationary pressures. The central bank stated it would target ETFs that track the JPX-Nikkei 400 Index.