MNI INTERVIEW2: BOJ Needs Greater Flexibility On ETFs: Ex-Offl

The Bank of Japan could be more flexible with its ETF purchases, taking greater note of market trends, a former BOJ official told MNI.

Policymakers shouldn't be wedded to buying ETFs when stock prices are at such elevated levels and its purchase plans are seen as undesirable, Takashi Kozu, the president of the Ricoh Institute of Sustainability and Business, told MNI in an interview on Thursday.

Kozu even suggested a more active role for the BOJ, although he said it was "very unlikely" the bank would adopt it.

The bank can "establish a separate account for ETFs -- 'BOJ investment trust' – and sell them to retailers through financial institutions to help the asset formation of the younger generation," Kozu said. The buying and selling of ETFs can be done via daily operations, he added.

"The BOJ thinks boosting the size of purchases is meaningful under QQE (quantitative and qualitative monetary easing) and it has traditionally only bought financial assets, mainly JGBs. But it should be sufficient for the BOJ to buy ETFs on a net basis," Kozu said.

Unless the BOJ changes the current stance, it will have to hold the ETFs it bought forever, he added.

Governor Haruhiko Kuroda told lawmakers Friday that purchases of ETFs are effective in easing the impact of unstable financial markets on overall confidence. Kuroda's comments come in the week that former BOJ chief economists Kazuo Momma and Kenzo Yamamoto also told MNI the ETF policy should be reconsidered and amended.