Bank of Japan's faster ETF exit still needs 43 years to sell its stockpile
The Bank of Japan has decided to sell its stock funds about 2.6 times faster than usual, cutting the estimated time needed to dispose of them from 112 years to 43. The figures are the central bank's own arithmetic: end-September holdings divided by annual sales at book value. Even at the quicker pace, the exit stretches past mid-century.
The reason for the restraint is that the BOJ is trying to undo years of purchases without disrupting the market it helped support. It brought equity exchange-traded funds into its easing programme in 2010, when it wanted to encourage risk-taking in an economy dogged by weak demand and deflation. Buying baskets of shares gave it broad market exposure rather than picking individual companies, and then-governor Masaaki Shirakawa acknowledged at the outset the potential losses and the effects of the bank's deeper involvement in allocating resources across industries.
New purchases ended in March 2024, but an ordinary equity ETF has no maturity date, so the bank cannot simply stop reinvesting and wait for the portfolio to expire. It needs actual buyers to take on the risk of future gains and losses. On 30 October the bank held its overnight rate target around 1.25% while approving faster disposals from January 2027, raising annual sales to about ¥860 billion at book value from ¥330 billion — roughly ¥2.46 trillion at market value, based on the relationship between market and book prices in ETFs it sold between January and September. The bank estimates the revised sales represent about one-thousandth of trading value in the Tokyo Stock Exchange's Prime Market over the same period, and officials say sales since January have gone smoothly.
The 43-year figure is a constant-pace estimate, not a completion forecast, and the bank retains the option to adjust or suspend disposals if conditions warrant. It is accepting prolonged equity ownership in exchange for limiting the volume it puts before buyers now, leaving future officials to inherit both the remaining assets and the discretion to sell them.
The story has a crypto thread: the yen carry trade has long financed large Bitcoin purchases, and a stronger yen or higher borrowing costs can erode those positions even when the dollar price of the asset holds. But the BOJ's ETF programme and private investors' financing are separate matters, and there is no evidence yet of forced selling. Ministry of Finance data for 18-24 October showed designated investors sold ¥92.6 billion of foreign long-term debt but bought ¥430.8 billion of foreign securities overall — transactions, not proof of funding stress.
