Bank of Japan Prepares to Begin Long-Awaited ETF Sales
Bank of Japan plans gradual ETF sales from January, targeting policy normalization while managing market risks amid rising interest rates.
The Bank of Japan is expected to begin selling its exchange-traded fund holdings as early as January. The move is a historic one. Moreover, the officials plan a cautious pace. Therefore, the process can be a decades-long one. Market participants are watching closely as Japan’s central bank winds down an unprecedented equity footprint.
BOJ Maps Out Gradual Exit From Massive ETF Portfolio
According to Bloomberg, sales could begin from January 2026. Preparations are almost reaching completion. But officials want to avoid disturbing the market. Thus, it was agreed by the policy board in September to sell the assets incrementally.
As of late September, holdings had a market value of 83 trillion yen or $534 billion. Meanwhile, the book-value was close to a value of about 37.1 trillion yen. Consequently, unrealized gains are still huge. The scale highlights the sensitivity of the execution.
The BOJ is planning to sell approximately annual sales of about 330 billion yen at book value. That is equivalent to about 620 billion yen at market value. At this rate, full disposal would take more than a century. Therefore, the initiative is a sign of normalization, not quick exit.
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The central bank owns about seven percent of the total stock market capitalization of Japan. As a result, its presence has long distorted price discovery. Officials consider gradual sales as key to the healthy return of market.
This decision comes on the heels of previous policy changes. In March 2024, the BOJ stopped ETF purchases. It also eliminated its negative interest rate policy. Subsequently, the bank completed sales of shares that it acquired from financial institutions by July 2025.
Those earlier disposals had passed operational hurdles. Hence, ETF sales were made possible. Nevertheless, the announcement in September was a surprise to markets. Initial volatility ensued reflecting the uncertainty of investors on time and impact.
Policymakers stressed caution. They plan to track the liquidity and sentiment at all times. Therefore, sales volumes can adjust in case of deteriorating conditions. This flexibility is still central to the plan.
Monetary Normalization Aligns With Broader Rate Outlook
The plan for ETF sales is coming as expectations are increasing for more rate hikes being made. Analysts expect it to jump to 0.75 percent this December. That would be the highest rate in decades. At present, the policy rate is 0.5 percent.
Officials are still engaged in maintaining a virtuous wage-price cycle. Strong wage growth has helped the inflation momentum. However, there are still external dangers. U.S. tariff policies remain an issue for Japan’s export-driven economy.
As such, the BOJ proceeds with caution between tightening and loosening. ETF sales strengthen that approach. They avoid market distortions without suddenly tightening the financial conditions. Therefore, the bank wants to become normalized on various fronts.
From a fiscal point of view, the extended time frame means that the immediate revenue impact is limited. However, stable sales could in the long run strengthen remittances to the government. Still, officials emphasize goals of the policy and not the bottom line.
Careful communication is expected by market participants. Any slip could roil equities. Hence, transparency will be critical as the sales begin. Investors will pay strict attention to the monthly operations.
Overall, the planned ETF sales are the end of unconventional easing. The BOJ built up assets while there was deflationary pressure. Now, stability of inflation makes it possible to retreat. But the retreat will be planned.
In the end, the beginning of January would be the symbol of confidence. It implies that Japan’s economy can cope with less support from its central bank. Still, patience is the key to the strategy. The BOJ seems to be ready for a generation-by-generation, not-quarter-by-quarter normalization.
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