The Bank of Japan (BoJ) is committing $6bn to buying ETFs as part of its recently sanctioned quantitative easing plan, Standard Life Investments says.
The firm's global investment strategist Richard Batty says the BoJ is allocating $60bn to buying assets as part of its policy to keep current interest rates at around zero and suppress longer-term interest rates.
Batty says although the $6bn allotted to buying ETFs is a small figure, it is an "interesting departure" by the BoJ, which will look to boost asset values and buy more ETFs going forward.
He says: "$60bn is not enough - but this is a signal of what the BoJ wants to do, it's part of a staged quantitative easing measure."
He says Japan is currently experiencing a liquidity trap, where people are not willing to spend or borrow enough, which is also posing a danger for other economies.
As a result, the BoJ is moving towards this quantitative easing plan of buying assets such as ETFs and Japanese Reits.
Batty adds: "If there are zero interest rates, BoJ can buy assets to push up the value, then the owners who sell these assets to the central bank will make a wealth gain."
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