The Bank of Japan extended its stimulus measures, supporting Japanese equities and country-specific exchange traded funds.
As part of its expanded stimulus plan, The BOJ decided to increase ETF purchases so its total holdings rose at an annual pace of ¥6 trillion, or $58 billion, up from the current ¥3.3 trillion, Reuters reports.
“Japan is conducting a powerful mix of flexible fiscal policy and quantitative easing,” BOJ Governor Haruhiko Kuroda said. “The government’s stimulus package helps reinforce this drive and is timely in achieving sustainable growth with price stability.”
[related_stories]The increased bet on Japanese equities helped support Japan-related ETFs. On Friday, the iShares MSCI Japan ETF (NYSEArca: EWJ) gained 1.9%, Deutsche X-trackers Japan JPX-Nikkei 400 Equity ETF (NYSEArca: JPN) rose 1.8% and iShares JPX-Nikkei 400 ETF (NYSEArca: JPXN) increased 2.4%.
The BOJ has been buying alternative index-based funds. For instance, the central bank has ETFs that track the JPX-Nikkei 400 Index. The JPX-Nikkei 400 Index was launched in January 2014 as a means of reinvigorating the Japanese equity market. The JPX-Nikkei 400 Index employs a rigorous screening process based on return on equity, cumulative operating profit and market capitalization to select high-quality, capital-efficient Japanese companies.
Related: As Bank of Japan Increases Investments, Look to This Index ETF
However, the central bank maintained its base money target at ¥80 trillion yen, kept its existing pace of purchasing other assets and left interest rates unchanged at 0.1%, disappointing investors who expected a more aggressive policy change.
“The BOJ did not live up to expectations,” Norio Miyagawa, senior economist at Mizuho Securities, told Reuters. “Increasing ETF purchases makes no contribution to achieving 2 percent inflation. The BOJ won’t admit it, but it has reached the limits of quantitative easing and negative rates.”
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Consequently, currency traders rushed into the Japanese yen, lowering expectations of looser policy measures that would devalue the JPY.
On Friday, the CurrencyShares Japanese Yen Trust (NYSEArca: FXY) jumped 3.0%, with the yen strengthening to ¥102.15 against the U.S. dollar.
iShares MSCI Japan ETF