TOKYO – Total assets held by the Bank of Japan rose to 714.56 trillion yen ($6.5 trillion) in fiscal 2020, the central bank’s data showed Thursday, quadrupling in eight years under Governor Haruhiko Kuroda’s aggressive monetary easing and growing to 1.3 times the size of the country’s economy.
Massive purchases of assets such as Japanese government bonds as part of ultraloose monetary policy and increased funding support for companies reeling from the coronavirus pandemic expanded the BOJ’s balance sheet in the year through March 31.
Before embarking on a raft of bold monetary easing steps under Kuroda, the BOJ’s total assets stood at 164 trillion yen at the end of March 2013.
The total assets rose from the previous year’s 604.48 trillion yen and are bigger than Japan’s nominal gross domestic product of 535.72 trillion yen in fiscal 2020.
Despite the aggressive monetary easing, the BOJ has yet to achieve its 2 percent inflation target. The goal will still be unattainable when Kuroda’s tenure ends in April 2023, according to BOJ projections.
The ratio of assets to GDP is larger than other major central banks including the U.S. Federal Reserve, which has also purchased assets to provide funds to the banking system.
Of the BOJ’s assets, Japanese government bonds totaled 532.17 trillion yen, up 9.5 percent from a year earlier, and loans to financial institutions marked a 2.3-fold gain to 125.84 trillion yen
Its holdings of exchange-traded funds, or investment funds traded on stock exchanges, jumped 20.7 percent to 35.88 trillion yen. The BOJ is stepping up purchases of ETFs in times of market turmoil.
The ETF holdings are currently valued at 51.51 trillion yen with the BOJ having an unrealized profit of 15.44 trillion yen at the end of March.
But the central bank would suffer a latent loss on the holdings if the benchmark Nikkei stock average falls to around 20,000, according to its estimate. On Thursday, the Nikkei closed at 28,549.01.
The pandemic has moved the BOJ’s inflation goal further away, prompting it to tweak policy tools to make monetary easing sustainable while addressing the side-effects.
One of the changes made in the March review was to carry out flexible asset purchases by removing its target for buying ETFs at an annual pace of 6 trillion yen, in response to criticism that the BOJ’s aggressive buying, which had made it a top holder of Japanese stocks, distorted market mechanisms.
BOJ policy board member Hitoshi Suzuki said Wednesday that the central bank needs to continue with ETF purchase but should “constrain” the pace of rise in holdings due to its impact on the balance sheet.
In the policy review, the BOJ also decided to allow 10-year Japanese government bond yields to move in a wider range than before by adjusting its purchases, apparently in response to criticism that the bank’s massive buying had soaked up liquidity in the market
As the BOJ seeks to keep both short-term and long-term interest rates low and stable, it has already gobbled up large amounts of Japanese government bonds, owning over 40 percent of those outstanding.