The Bank of Japan will significantly accelerate the sale of its exchange-traded fund holdings, targeting disposals worth approximately ₹7,200 crore ($5.45 billion) annually on a book value basis. According to reports from Reuters, the central bank will sell ETFs at a pace equivalent to around 0.1% of the market's trading value. This decision comes as the market value of its ETF holdings has expanded significantly alongside gains in Japanese equities, making the unwinding process more urgent. The BOJ announced this move on Friday as it steps up efforts to unwind its massive stock market portfolio.
The faster pace of disposals will substantially shorten the estimated time required to unwind the portfolio. As reported by Reuters, the BOJ said completing the sale of its ETF holdings would now take approximately 43 years, compared with its earlier estimate of 112 years. The revised selling plan will come into effect in January 2027, marking an acceleration in the BOJ's gradual withdrawal from its extensive ETF holdings. The decision reflects the need to gradually reduce these holdings while limiting the potential impact on market liquidity and investor sentiment.
The move marks an acceleration in the BOJ's gradual withdrawal from its extensive ETF holdings, accumulated over years of monetary easing and efforts to support Japan's equity market. According to Reuters, the central bank's approach is aimed at reducing its market presence while avoiding excessive disruption to stock prices. The BOJ's ETF holdings have grown substantially in market value as Japanese equities have rallied, increasing the scale of its balance-sheet exposure to the stock market. The central bank's decision to accelerate sales reflects the need to gradually reduce these holdings while limiting the potential impact on market liquidity and investor sentiment.
The unwinding process is expected to remain gradual, with the BOJ opting for a measured pace of disposals rather than a rapid liquidation of its portfolio. As reported by Reuters, the revised timeline nevertheless signals a more decisive approach towards normalising its balance sheet after years of unconventional monetary easing. The decision reflects the need to gradually reduce these holdings while limiting the potential impact on market liquidity and investor sentiment. The central bank's approach aims to maintain market stability while systematically reducing its substantial equity market exposure.
