Bank of Japan looks to stock purchases as new stimulus measure
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
The Federal Reserve has sparked heated debate about the wisdom of its new plan to buy $600 billion in Treasury bonds as a way to pump money into the economy.
The Bank of Japan, which has been trying for two decades to foster sustained growth of its deflation-riddled economy, is well beyond buying government bonds. Now it’s focusing on stock purchases as a tool to breathe new life into the economy.
From Bloomberg News:
The Bank of Japan’s planned purchases of real-estate investment trusts and exchange-traded funds may bolster investor confidence and support markets that have failed to recover ground lost since the global financial crisis. Governor Masaaki Shirakawa and his policy board will start a two-day policy meeting [Thursday] to discuss the purchases, which are part of a broader 5 trillion-yen ($62 billion) fund unveiled last month. The planned buys “are an endorsement of the securities and encourage investors to participate in the market,” said Hide Ichii, a Tokyo-based analyst at CBRE Global Real Estate Securities, which manages over $2.5 billion of property stocks and real-estate investment trusts. “A surge in REIT prices will spark real-estate transactions and can eventually help shore up land prices.”
A central bank buying stocks for its own portfolio? That’s the nightmare scenario of so-called quantitative easing: If government-bond purchases don’t get the job done, do desperate policymakers start looking for other assets to soak up with money they create out of thin air?
-- Tom Petruno