Bank of Japan Boosts Its Number of ETF Purchases

Amid the heavy volatility, investors are experiencing these days as a result of the coronavirus outbreak, the exchange-traded fund (ETF) is emerging as an investment vehicle that is able to help with liquidity in these frenzied markets, in addition to its other benefits. The Bank of Japan is certainly aware of this and has ramped up its purchases of ETFs.

The buying bonanza comes after the BOJ recently kept its rates unchanged while the U.S. Federal Reserve slashed rates to zero.

“At its emergency one-day monetary policy meeting, the Bank of Japan (BOJ) board members decided to keep rates unchanged at -10bps while maintaining a10-yr JGB yield target at 0.00%,” a FX Street report noted. “The BOJ vote was 8 to 1, leaving its pledge to buy JGBs unchanged so that its holdings increase at an annual pace of around 80 trln yen.”

In addition to staying put on rates, the BOJ injected a healthy dose of capital into ETFs.

“The central bank, however, increased the annual pace of ETF purchases to ¥12 trillion (previously ¥6 trillion) and introduced a new lending program to smooth funding for firms,” the report added.

The markets have definitely been a slippery slope to climb these days and U.S. investors are looking elsewhere, such as overseas in countries like China where the effects of the coronavirus could be weakening. Japan could also be an option via single country-focused ETFs, smart beta strategies using a multi-factor approach, or both.

ETFs using a multifactor approach to international markets can help address market risks and provide a low volatility safe haven, while still getting exposure to countries like Japan. For example, the WisdomTree Japan Multifactor Fund (BATS: JNMF) seeks income and capital appreciation by investing in Japanese equity securities with the highest potential for returns based on proprietary measures of fundamental factors, such as value and quality, and technical factors, such as momentum and correlation.

With JNMF, investors can:

  • Gain targeted multifactor exposure to Japanese equities, while dynamically hedging currency risk.
  • Use to strategically seek alpha and help reduce risk as a core holding over longer time horizons.
  • Use to help lower the cost of active managers through systematic factor exposures.

The Fund’s objective changed effective March 29, 2019. Prior to March 29, 2019, Fund performance reflects the investment objective of the Fund when it tracked the performance, before fees and expenses, of the WisdomTree Dynamic Currency Hedged Japan Equity Index.

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