Central Bank of Japan Decides to Offload Equity Funds and Real Estate Investment Trusts
Bank of Japan (BOJ) Takes Steps Towards Monetary Policy Normalisation
In a significant move, the Bank of Japan (BOJ) has decided to sell exchange-traded funds (ETFs) and Japanese real estate investment trusts (J-REITs) that it had previously purchased as part of its monetary easing program. This decision was made during a two-day meeting of the BOJ's Policy Board, led by Governor Kazuo Ueda.
The BOJ has kept the policy of guiding the unsecured overnight call rate, Japan's benchmark short-term policy rate, unchanged for five consecutive policy-setting meetings after raising it from 0.25% to 0.5% in January. However, at the same meeting where the decision to sell ETFs and J-REITs was made, the BOJ decided to maintain the policy of guiding the unsecured overnight call rate to around 0.5%.
The decision to sell ETFs and J-REITs was made by a unanimous vote, excluding members Hajime Takata and Naoki Tamura, who voted against maintaining the policy rate. The sale of these financial instruments marks another step towards normalising the BOJ's monetary policy.
Policy Board members Takata and Tamura were not alone in their dissent. They argued for a rate hike in the decision-making process, but their views were not supported by the majority. The BOJ did not change the policy of guiding the unsecured overnight call rate in the meeting where the decision to sell ETFs and J-REITs was made.
The BOJ's decision to sell ETFs and J-REITs was made by a vote of seven to two. This move is expected to help the BOJ reduce its holdings of these assets, which have ballooned due to its extensive monetary easing measures over the years. The BOJ's decision is seen as a sign of confidence in the Japanese economy's ability to withstand tighter monetary conditions.
In conclusion, the BOJ's decision to sell ETFs and J-REITs is a significant step towards normalising its monetary policy. While not all members of the Policy Board agreed with this decision, the majority voted in favour, indicating a shift towards a more normalised monetary policy in Japan.
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