Central Banks

Most banks expect BOJ stimulus, particularly ETF purchases: Survey

Japan's negative rates policy a failure?
Japan's negative rates policy a failure?

Most major banks are expecting the Bank of Japan (BOJ) to inject a hefty dose of stimulus, most likely including a bigger ETF buying program, when it ends a two-day meeting on Thursday, a new CNBC survey showed.

The BOJ's monetary policy review, which kicked off Wednesday, was billed by HSBC as "the most closely watched meeting in recent memory," amid elevated easing expectations fueled by a stronger yen, year-to-date losses on the benchmark Nikkei 225, softening inflation trends and the economic damage from the recent Kyushu earthquakes.

After introducing negative interest rates in January, analysts believe Governor Haruhiko Kuroda may use other measures to try to weaken the yen, such as increasing purchases of government bonds, exchange-traded stock funds (ETFs) or funds that are invested in property.

The BOJ already owns around half of Japan's ETF market, according to Reuters.

Haruhiko Kuroda
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In December, the bank announced it would start buying ETFs at an annual pace of 300 billion yen ($2.4 billion) starting in April, in addition to its existing annual purchase program worth about 3 trillion yen. Just last week, Kuroda said the bank's presence in the ETF market was "not too big," hinting that a top up may be on the cards.

Ahead of the meeting's verdict, CNBC surveyed top financial commentators to gauge their expectations.

Goldman Sachs

"We think the BOJ is most likely to ease mainly via the qualitative measure, with increasing ETF purchasing the central pillar, with a view to improving business confidence. We think the market is already factoring in an increase in annual purchasing from 3.3 trillion yen to 5-6 trillion, and we thus think the BOJ may look to slightly more than double its current figure to around 7 trillion yen. We also see a possibility that the BOJ may combine the expansion of ETF purchases with a cut in the interest rate of its loan support scheme."

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Bank of America Merrill Lynch

"We expect the BOJ expand its quantitative and qualitative monetary easing (QQE) policy at the April or June meeting with the former slightly more likely. In our base case the main stimulus is a doubling of annual ETF purchases from 3 trillion yen to 6 trillion... BoJ ETF purchases will directly impact supply and demand on the stock markets, but its long-term impact on the real economy and risk sentiment remains unclear."

Could BOJ's Kuroda surprise again?
Could BOJ's Kuroda surprise again?

Standard Chartered

"We expect the BOJ to expand ETF purchases by 3-5 trillion yen, taking the annual ETF purchases to 6.3-8.3 trillion yen. We also expect the BOJ to cut the interest rate on its loan support program into -0.1 percent; the BOJ is also likely to set up a 1 trillion yen lending program with interest rates as low as -0.1 percent to support FIs in the earthquake-hit area. Cutting rates on reserves are unlikely at the April meeting due to the backlash against this policy. We think the BOJ is likely to cut interest rates one or two more times in the second-half, by a total of 10-20 basis points (bps)."

Morgan Stanley

"We expect aggressive easing this week: expansion of the monetary base target from 80 trillion yen to 90-100 trillion; additions to the loan support program, ETFs, and REITs; and the start of purchase of municipal bonds and perhaps corporate bonds. A rate cut is also likely, from -0.1 percent by at least 10 bps, and perhaps 20 bps."


"Our base case is that the policy board will focus on the quantitative" and qualitative aspects of its easing program this time around and stick with our call that the policy board will raise its annual equity (ETF) purchases by 10 trillion yen, taking the monetary base target to 90 trillion yen, from 80 trillion previously. We do not expect the board to raise the JGB purchase target."

UBP: BOJ is widely expected to move
UBP: BOJ is widely expected to move


"Our view is that it is possible that the BOJ may launch more stimulus on 28 April but it may not do anything too drastic (maybe more JGB and/or ETF purchases instead of cutting rates further) and if the BOJ does act it would be mildly positive for risk assets like equities and should translate to modest weakness for the yen."


"To remove the stigma of the negative interest rate and to support the Kyushu area hit by the earthquake, the BOJ is anticipated to provide loans at -0.1 percent to private sector banks. It could also expand the "quality" arm of the QQE program, by extending the maturity of the JGBs purchased under the program to 15 years, which would weaken the yen."

Barclays, Deutsche Bank, Nomura and JP Morgan are among the banks that predicted no action on Thursday.

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