Yeliz Akmaca 
Japan’s long-postponed ETF exit is no longer theoretical. The Bank of Japan (BoJ) is preparing to begin unwinding its massive 83 trillion yen ETF portfolio as early as January, marking a turning point after more than a decade of extraordinary monetary policy.
This will not be a fast retreat. On the contrary, the sell-off is designed as a slow, controlled withdrawal that could stretch across generations. At the current pace, the full exit may take up to 112 years, underscoring how delicate the normalization process remains.
For markets, the key issue is not the start date itself, but the method and speed of the sales.
No Rush, No Shock
According to details shared with Bloomberg News, the BoJ does not plan to dump ETFs directly into the open market. Instead, alternatives such as block sales or transferring management to a specialized institution are under serious consideration. The objective is clear: avoid creating visible selling pressure.
Under the framework approved at the September policy meeting, ETF sales will be carried out at book value, at an annual pace of roughly 330 billion yen. If maintained, this rhythm implies a process lasting more than a century.
As of the end of September, the market value of the BoJ’s ETF holdings stood at 83 trillion yen, while their book value was significantly lower at 37.1 trillion yen. Japan’s strong equity rally in recent years has dramatically inflated the paper value of these assets.
A Nearly Invisible Exit Strategy
Officials aim to replicate the approach used in the early 2000s, when the BoJ sold shares acquired from troubled banks. That process unfolded over roughly ten years and left little to no market footprint. The message this time is similar: selling will happen, but panic is not part of the plan.
Monthly sales are expected to follow a steady cadence, though flexibility remains built in. In a stress scenario comparable to the 2008 Global Financial Crisis, ETF sales could be temporarily suspended.
Operationally, the BoJ confirmed earlier this month that Sumitomo Mitsui Trust Bank won the tender to manage the execution of the sales—another signal that the exit is being engineered quietly rather than forcefully.
Who Fills the Void?
The scale of the portfolio matters. The BoJ’s ETF holdings represent roughly 7% of Japan’s equity market. This is not just a balance-sheet adjustment; it is the gradual withdrawal of one of the market’s largest and most passive players.
The real risk lies less in volume and more in timing perception. As the central bank signals normalization, uncertainty grows around whether private and foreign investors are ready to absorb that space with the same consistency.
Dividends add another layer. The BoJ currently earns about 1.2 trillion yen per year in dividend income from these ETFs. Walking away from that cash flow reflects confidence in achieving inflation targets, but it also reduces balance-sheet flexibility over time.
This sell-off plan signals more than a policy shift. It marks the beginning of a new phase in Japan’s market psychology—one where company fundamentals and governance will matter more as the state’s invisible safety net slowly fades.
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