BOJ’s ETF purchase hits 3-year low

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    Lowest level. A security guard walking past in front of the Bank of Japan headquarters in Tokyo. The BOJ bought 163 billion yen ($1.5 billion) worth of Japanese stock ETFs in September, central bank data showed. (Reuters Photo)
    Lowest level. A security guard walking past in front of the Bank of Japan headquarters in Tokyo. The BOJ bought 163 billion yen ($1.5 billion) worth of Japanese stock ETFs in September, central bank data showed. (Reuters Photo)

    TOKYO- The Bank of Japan’s exchange-traded funds purchase this month hit the lowest level in more than three years, but few market players see it as a sign the central bank is tapering its stock buying.

    The BOJ bought 163 billion yen ($1.5 billion) worth of Japanese stock ETFs in September, central bank data showed on Monday.

    It was the smallest monthly buying after the central bank doubled the buying target to 6 trillion yen per year in July 2016. So far this year, the BOJ has bought 3.6 trillion yen in ETFs, about 20 percent less than same period last year.

    Nevertheless, market players see few immediate policy implications.

    The BOJ’s buying fell in September as the BOJ has been sticking to its unwritten, self-imposed rule that it buys ETFs on a day when the Topix index falls 0.5 percent or more in the morning.

    In September, the BOJ bought only a little, just because Japanese shares have rallied strongly, with the Topix comfortably outperforming global peers.

    Topix climbed 5.0 percent, compared with 1.2 percent gain in the US S&P500 and 3.2 percent rise in Europe’s STOXX600.

    Yet, analysts say the outperformance of Japanese shares was largely due to short-covering by foreign speculators while long-only investors have mostly stayed away, suggesting the market remains vulnerable.

    One key worry for overseas investors is a hit to the Japanese economy from an imminent consumption tax hike, scheduled on Tuesday.

    “It will take time before long-only foreign investors start buying Japanese shares as ‘global cyclical stocks’,” said Masatoshi Kikuchi, chief equity strategist at Mizuho Securities.

    “We think they will wait and see how the domestic economy fares after the sales tax hike and whether mid-year earnings reporting season shows a profit turnaround.” – Reuters