Global Market: BOJ to accelerate ETF sales, cut holdings overhaul timeline to 43 years

The Bank of Japan (BOJ) will accelerate the sale of its exchange-traded fund (ETF) holdings, targeting disposals worth approximately 860 billion yen ($5.45 billion) annually on a book value basis, as it steps up efforts to unwind its massive stock market portfolio, Reuters reported.

The central bank said on Friday that it would sell the ETFs at a pace equivalent to around 0.1% of the market's trading value. The decision comes as the market value of its ETF holdings has expanded significantly alongside gains in Japanese equities.

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The faster pace of disposals will substantially shorten the estimated time required to unwind the portfolio. 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.

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. The central bank's approach is aimed at reducing its market presence while avoiding excessive disruption to stock prices, Reuters reported.

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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. The revised timeline nevertheless signals a more decisive approach towards normalising its balance sheet after years of unconventional monetary easing.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)
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