(Bloomberg) -- The Bank of Japan may have adopted a new standard in deciding when to support stocks, according to Seiichi Suzuki, a market analyst at Tokai Tokyo Research Institute Co.
While market consensus has it that the BOJ purchases ETFs when the Topix index falls at least 0.5% during the morning session, recent buying patterns have changed, Suzuki said.
“The bar for ETF purchases has been lowered to a drop of 0.25% on a day when the stock gauge has fallen for a second consecutive session,” Suzuki said. “This is to prevent any steep declines in stock prices” regardless of the pace of their ETF purchases, he said.
The central bank has said it may buy up to 12 trillion yen ($112 billion) in ETFs a year, though in principle its target is 6 trillion yen. The Bank of Japan declined to comment when contacted by Bloomberg News.
On July 20, the BOJ bought ETFs when the Topix fell only 0.3% during the morning session. Similarly, the BOJ purchased ETFs on May 15, June 19 and July 9 when the benchmark measure lost about 0.3%. In contrast, the BOJ refrained from purchases on May 22 and July 7 even as the Topix declined about 0.5%.
The central bank in March doubled its annual target for purchases of ETFs that track Japan’s major stock indexes to 12 trillion yen as part of its effort to combat the impact of the coronavirus. The BOJ started buying ETFs in 2010, with Governor Haruhiko Kuroda later accelerating purchases as part of an unprecedented stimulus package aimed at revitalizing the economy.
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