BOJ reportedly considers scrapping ETF purchases with inflation target in sight

The report says that the Japanese central bank is mulling such a move as policymakers see little need to keep buying ETFs to limit risk premiums in a market that is looking rather frothy. For some context, Japan’s Nikkei 225 index hit a fresh record high above 40,000 earlier this month as it surpassed its previous highs set in 1989.

But as the BOJ’s next steps come into focus, the index retraced lower since the end of last week with an over 2% drop on Monday this week as well. Typically, a steep drop such as that would prompt the central bank to step in but that was not the case this time around.

The BOJ refrained from doing so on Monday and it is perhaps evident now as to why. That considering they are looking to leave behind the playbook of providing a backstop for the stock market.

Even if they had only stepped in with ETF purchases three times last year, the BOJ remains the largest single stakeholder of Japanese stocks as of now. Talk about making a profit, eh?

This article was written by Justin Low at www.forexlive.com.