BoJ's Kuroda says policy shift is not additional stimulus

The Bank of Japan kept its base money target under the stimulus programme but set up a new one to buy exchange-traded funds, extend the maturity of bonds it owns and up its purchase of key risky assets.

Markets in Japan briefly rallied on the news, but BoJ governor Haruhiko Kuroda said at the press conference following the announcement that the latest policy changes did not amount to additional easing as they do not address the downside risks to the economy.

He said they were designed to give flexibility to adjust policy that would make it easier to sustain or even expand stimulus.

Kuroda reiterated that quantitative and qualitative easing would continue as long as need and that the bank would adjust policy if necessary.

He also said the consumer price index was on track to hit 2% the second half of next year, although the timing was dependent on oil prices.

Kuroda talked up the economic recovery and downplayed the risk of the emerging market slowdown on the inflation outlook.

“Initially, this appeared to be a surprising addition to the current stimulus measures and the yen slid against the dollar, while the Nikkei rallied in response to the news, but these moves were short-lived,” said Craig Erlam, senior market analyst at Oanda.

“In reality, the measures were negligible, especially as the ETF purchases came alongside a commitment to sell stock it has purchased since 2002, also at a rate of 300bn yen per year, creating zero net purchases. The only marginal boost comes from the kind of stocks the BoJ is now targeting, but again, this is negligible. “

Erlam added that 300bn yen in purchases comes on top of its 3trn yen of ETF purchases and 80trn yen of asset purchases under its QQE program. “So, hardly anything to write home about.”