The Bank of Japan (BOJ) is preparing to take a historic step by beginning the gradual sale of its massive exchange-traded fund (ETF) holdings as early as January, marking a new phase in the central bank’s long and unconventional monetary experiment.
According to people familiar with the matter, the planned ETF sales will be conducted cautiously and are expected to stretch over decades to avoid disrupting Japan’s financial markets.
The BOJ’s ETF portfolio had a market value of about ¥83 trillion ($534 billion) at the end of September, while its book value stood at ¥37.1 trillion, reflecting years of aggressive asset purchases during periods of deflation and weak economic growth.
The central bank accumulated ETFs as part of its ultra-loose monetary policy launched in 2010 and expanded under former Governor Haruhiko Kuroda.
The strategy aimed to boost investor confidence, lift stock prices, and stimulate economic activity by signaling strong central bank support for risk assets. Over time, the BOJ became one of the largest shareholders in Japan’s equity market, raising concerns about market distortions and the eventual exit strategy.
Officials have repeatedly emphasized that any unwinding would be slow and carefully managed. Market participants expect the BOJ to use methods such as transferring ETFs to long-term investors, converting holdings into trust vehicles, or selling in small tranches during periods of strong market demand.
Sudden or large-scale sales could trigger sharp declines in Japanese equities, something policymakers are keen to avoid.
The timing of the ETF sales aligns with broader normalization efforts following the BOJ’s exit from negative interest rates and yield curve control earlier this year. While inflation has shown signs of stabilizing above the central bank’s target, officials remain cautious, wary of undermining fragile economic momentum.
Analysts say the ETF sell-down could become one of the longest-running balance-sheet reduction programs ever undertaken by a central bank.
Even modest annual reductions would take decades to fully unwind the position, underscoring how deeply the BOJ intervened in markets during years of economic stagnation.
For investors, the move signals a gradual return to market-driven pricing in Japan’s equity market, though the BOJ is expected to remain a powerful presence for many years to come.