BOJ to begin lending ETFs to prop up market liquidity – Metro US

BOJ to begin lending ETFs to prop up market liquidity

By Leika Kihara

TOKYO (Reuters) – The Bank of Japan on Thursday unveiled details of a new scheme to lend exchange-traded funds (ETF) to investors, as part of efforts to make its massive stimulus program more sustainable by boosting market liquidity for the instrument.

Under the scheme, the BOJ will lend ETFs from its holdings to major market participants in the market by up to one year, the central bank said.

The move is aimed at nurturing Japan’s still small market for ETFs, or trust funds investing in stocks, by boosting liquidity.

The BOJ hopes to kick off the scheme in the next few months after gaining approval from the Ministry of Finance and selecting eligible counterparties.

Lending of ETFs will be conducted on a daily basis according to market participants’ needs, the BOJ said.

Under its massive stimulus program, the BOJ buys not only government bonds but also ETFs and other assets as part of efforts to reflate the economy.

Some investors have complained that the BOJ’s huge buying was crowding out private traders and draining stock market liquidity.

The central bank kept monetary settings unchanged on Thursday, as expected, and maintained its upbeat view on the economy, suggesting policymakers are in no hurry to boost stimulus.

The BOJ had worked on details after a decision by the board in April to launch the scheme as part of moves to strengthen the sustainability of its stimulus program.

(Reporting by Leika Kihara; Editing by Chris Gallagher)