Bank of Japan cuts volume of securities bought on stock exchange

Japanese central bank limited buying of mutual fund shares on Tokyo Stock Exchange. The bank should now stimulate markets with roughly 20% less financial aid than in last month.

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Investors perceive growth of Nikkei index in one fifth, the main index traded on Tokyo Stock exchange, to be the main reason for such a decision. While Bank of Japan spent 120 billion yen (around $1,1 billion) in April, from now on it will be 20 billion yen ($930 billion) less. Japan’s central bank announced in March its intention to purchase ETF fund shares to protect Tokyo Stock Exchange from sales and Nikkei index from decline.

Purchase of securities by central banks aims to provide financial markets with liquidity. It’s so called quantitative easing, when central banks inject money into the economy to stimulate investment and aggregate demand. Some central banks buy government bonds and motivate financial markets to act similarly. Governments can then rely on sales of emitted bonds, what provides necessary resources to fiscal stimulation of whole the economy and eliminates economic recession.


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