Ibayashi now argued that the globally economy has entered a positive cycle that does not require central bankers’s constant hand-holding, so central banks like BOJ can begin to rein in its massive stimulus programs. The UBS analysts also pointed out that companies are increasing capital spending, which may replace stimulus measures.
“Given the circumstances at this point in time, it is difficult for the BOJ to keep buying ETFs at six trillion yen per year,” Ibayashi said.
The increased bet on Japanese equities have helped support Japan-related ETFs, such as the iShares MSCI Japan ETF (NYSEArca: EWJ), Deutsche X-trackers Japan JPX-Nikkei 400 Equity ETF (NYSEArca: JPN) and iShares JPX-Nikkei 400 ETF (NYSEArca: JPXN), but the good times won’t last forever.
The BOJ has been buying alternative index-based funds. For instance, the central bank has acquired Japan-listed ETFs that track the JPX-Nikkei 400 Index, which also serves as the underlying benchmark for JPN and JPXN. 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.
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