Reuters reports that Kimie Harada, a government panel member and an expert on the country's market functions, said that Bank of Japan has room to be more creative in how it buys exchange-traded funds (ETF) to mitigate market distortions caused by the programme.
The BOJ has been buying ETFs for a decade as part of efforts to reflate growth and pull Japan out of deflation. It kept ramping up purchases to prevent a slump in stock prices from hurting household and business confidence, and discourage them from boosting spending.
Harada said that buying tailor-made ETFs instead of standardised ones would allow the BOJ to remove small-cap and low-float stocks from its purchases to prevent its huge presence from distorting price moves.
The BOJ might find idea is worth considering when it conducts a review of its policy tools in March, said Harada, a panel member of Japan's banking regulator and a professor at Chuo University.
"It's been clear for some time that the BOJ's ETF buying is unsustainable," she told. "The BOJ has no awareness it has become a huge investor in Japan's stock market, which is problematic."
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