The Bank of Japan announced that it will start selling its ETF holdings next week to ensure a smooth transition in the market with a "century pace".

The Bank of Japan released a statement on Friday, stating that it will gradually start selling its holdings of Exchange-Traded Funds (ETFs) and Real Estate Investment Trusts (J-REITs) next week. The bank decided at its September monetary policy meeting to advance this process in a "gradual and market-disrupting" manner. As of the end of September, the market value of ETFs held by the Bank of Japan is as high as 83 trillion yen (approximately $525 billion USD), and with the Japanese stock market hitting record highs this week, their valuation may further increase. According to central bank data, the book value of these ETFs is approximately 37.1 trillion yen. The Policy Board led by Governor Kuroda decided at the September monetary policy meeting to reduce assets at a pace of 330 billion yen per year (275 billion yen per month) based on book value. If this pace is maintained, it is estimated that it will take approximately 112 years to complete the entire sale. Sources revealed last month that the Bank of Japan hopes that this reduction will be "virtually unnoticed by the market" similar to the disposal of problem bank stocks in the 2000s. The reduction of bank stocks took about ten years and was smoothly completed in July last year without causing a significant impact on the financial markets. Earlier this week, the Nikkei 225 index reached a historic high amid expectations that Prime Minister Suga's administration may expand fiscal spending. The Japanese stock market has more than doubled in the past three years, driving the rapid increase in the market value of assets held by the Bank of Japan. Analysts point out that over time, this reduction may provide additional funds to the government through the Bank of Japan transferring profits to the national treasury. The current Suga administration is trying to maintain an expansionary fiscal policy, even though Japan's public debt burden is the highest among developed countries. Sources said that while the central bank plans to maintain a steady pace of reduction each month, it may also temporarily suspend selling operations in the event of extreme market volatility similar to that during the global financial crisis of 2008. The Bank of Japan started its ETF and J-REITs purchase program in December 2010 as part of its monetary easing policy. After implementing an ultra-easy monetary policy in 2013, the purchase scale expanded significantly. The asset purchase program officially ends in March 2024.