BOJ seen dropping pledge to buy ETFs at current pace - ex-c.bank policymaker
29/01/2021 08:36
* BOJ seen tweaking ETF pledge at March review - ex-BOJ
Shirai
* BOJ's biggest concern is its ETF buying -Shirai
* Shirai says BOJ's ETF buying 'problematic' from ESG
perspective
By Leika Kihara and Takahiko Wada
TOKYO, Jan 29 (Reuters) - The Bank of Japan is likely to
drop its commitment to buy exchange-traded funds (ETF) at an
annual pace of roughly 6 trillion yen ($57 billion) at its next
policy review, former central bank policymaker Sayuri Shirai
said on Friday.
The central bank will take the step when it reviews its
policy tools in March to make them more sustainable, she said.
The BOJ's massive purchases have drawn much criticism for
distorting markets and sources have told Reuters that the
central bank will discuss ways to scale back its ETF buying at
the March review. urn:newsml:reuters.com:*:nL4N2JT0XW
"For the BOJ, the biggest concern is probably its ETF-buying
programme," as it exposes the bank's balance sheet to excessive
market risk and crowds out private investors, said Shirai,
currently a professor at Japan's Keio University.
"The BOJ shouldn't be buying ETFs this much. It probably
wants to change its current commitment so it can more easily
slow the pace of buying, without giving markets the impression
it is tightening monetary policy," she told Reuters on Friday.
The central bank's pledge, which also allows for purchases
of up to 12 trillion yen annually, is part of efforts to boost
prices towards its 2% inflation target.
The BOJ's huge ETF buying is also "problematic" as it runs
counter to Prime Minister Yoshihide Suga's efforts to promote
environmental, social and governance (ESG) investment, said
Shirai, who is also a senior advisor to Federated Hermes Equity
Ownership Services.
As advisor to the U.K.-based ESG engagement service firm,
Shirai meets with Japanese firms to help raise their awareness
of ESG issues.
By soaking up liquid stocks and becoming a big shareholder
of some firms, the BOJ is making it hard for private
shareholders to prod companies to change their behaviour and
become more aware of ESG principles, Shirai said.
"ESG investment is among the key pillars of the Suga
administration's growth strategy," she said. "The BOJ's ETF
buying runs counter to what the government is trying to do."
($1 = 104.4900 yen)
(Reporting by Leika Kihara; Editing by Edwina Gibbs)
((leika.kihara@thomsonreuters.com; +813-6441-1828; Reuters
Messaging: leika.kihara.reuters.com@reuters.net))