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MNI (Tokyo)

One of the few options open to the Bank of Japan as it seeks to deliver a meaningful policy review in March is for the bank to clarify its conduct of ETF purchases and explain how it will help to make easy policy more effective and sustainable, a former senior BOJ executive told MNI in an interview on Wednesday.

"Going by a process of elimination, the ETF buying program is the only tool the BOJ can tweak and clarifying the process will make it clear that the bank will buy ETFs only when risk premia move sharply upward and not under normal conditions," Hiromi Yamaoka, a former director-general of the Financial Markets Department, said.

The BOJ is the only central bank that has bought stocks, he said, adding that "the rapid recovery in stock prices globally has increased the vigilance of central banks in advanced economies."

"There is an essential issue that the BOJ has bought stocks at high levels," said Yamaoka, currently a board member and director-general at Future Institute for Economic Research and Financial Strategy. "Five or 10 years from now, when monetary authorities inspect past policy, the big question will be whether the BOJ's stock purchases promoted an asset bubble," he said.

MNI Tokyo Bureau | +81 90-2175-0040 |
MNI Tokyo Bureau | +81 90-2175-0040 |

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