BOJ Policy Maker Highlights Cost of Huge Asset Buying

The Bank of Japan must be watchful of the potential demerits of its huge asset purchases. The central bank will find ways to make its asset-buying program more flexible in a policy review due in March. This was according to board member Toyoaki Nakamura. 

Nakamura was a former business executive who joined the board in July. He said the BOJ’s purchases of exchange-traded funds (ETF) have helped eradicate Japan’s deflationary mindset. That is by keeping stock markets stable.

But he said the asset-buying program would be among the tools the BOJ will study in a March review. It aims to make its massive stimulus program more sustainable.

The central bank’s ETF purchases will remain a necessary tool. This was a statement from Nakamura in a speech at an online meeting with business leaders on Wednesday.

By purchasing huge amounts of assets and holding onto them for a prolonged period, the BOJ could affect market functions. It’s something they need to be mindful of, he added.

The coronavirus pandemic is likely to prolong its battle to fire up inflation to its 2% target. The BOJ revealed a plan to conduct a review of its policy tools in March to make them more sustainable and effective.

Sources said the BOJ would discuss ways to scale back its controversial ETF-buying program. Moreover, it will allow yields to move more widely around its target, partly to deal with the rising cost of prolonged easing.

Due to the impact of COVID-19, it’s inevitable for their monetary easing to be prolonged further. Suppose there’s anything more they can do to make their monetary easing more effective and sustainable. In that case, they’ll take that into account, Nakamura said.

Biden Meets Business Leaders

Elsewhere, U.S. President Joe Biden said on Tuesday, he agreed with a proposal by Democratic legislators. The proposal would limit or phase out stimulus payments to higher-income individuals as part of his $1.9 trillion coronavirus relief bill.

Biden said, “Yes” when asked at the beginning of a meeting with business leaders whether he supported the proposal. That would send $1,400 stimulus checks to Americans earning up to $75,000 and households making up to $150,000.

He said he had been in touch with Republican leaders about the package. He thinks they’re in a position to think big, he said. 

Biden would be discussing infrastructure and the minimum wage, he said. This will be with JP Morgan Chase, Walmart, Gap Inc, and Lowe’s Companies.

He was concerned to get a reaction from the business leaders to his administration’s approach. Moreover, to see if they can find some common ground, he added.

The stimulus package is key to kickstarting the new U.S. President’s agenda, focusing on two of his top goals. These are fighting the pandemic and boosting the economy.

Furthermore, the plan rolled out by congressional Democrats mirrored much of his proposal. It was ignoring calls from Republicans to lower the income threshold for payments.

The most recent Democratic proposal would phase out those payments at lower income thresholds than previous stimulus efforts. It will completely cut off individuals earning more than $100,000 and couples earning more than $200,000.

President Biden has stood firm on the size of the checks. He remained open, however, to discussion on tweaking the income requirements.

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