June 29, 2017 / 7:14 AM / 7 months ago

BOJ could cut ETF buying if inflation nears 2 percent - Harada

TOKYO (Reuters) - Bank of Japan board member Yutaka Harada said on Thursday the central bank could reduce or end purchases of exchange-traded funds (ETF) if inflation approaches its 2 percent target.

He also said the BOJ’s current ultra-loose monetary policy is already bold enough, signalling that no additional stimulus was forthcoming in the near future.

“The BOJ is buying ETFs to stimulate the economy and achieve its 2 percent inflation target,” Harada told a seminar.

“If achievement of the target comes into sight, the BOJ could of course reduce or stop ETF purchases,” he said.

But Harada said it was too early to say when the BOJ could reduce ETF purchases as inflation remains distant from the bank’s target.

Under a massive stimulus programme dubbed “quantitative and qualitative easing” (QQE), the BOJ has been aggressively buying assets such as government bonds, ETFs and trust funds investing in property.

But inflation has failed to reach 2 percent, forcing the BOJ to add yield curve control to QQE last year and shift its policy target to interest rates from the pace of money printing.

Harada, a vocal advocate of aggressive money printing, said the BOJ’s stimulus programme was “already sufficiently bold”.

“By continuing this programme, we can expect inflation to gradually approach 2 percent,” he said.

Harada also said it was premature to debate when the BOJ could withdraw stimulus. But he said the BOJ will seek to avoid any spike in bond yields through close dialogue with financial markets, when the time comes to tighten policy.

“We don’t know when it will happen but at some point, the BOJ will undoubtedly need to tighten monetary policy,” Harada said.

Reporting by Leika Kihara; Editing by Richard Borsuk

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