What happens when a central bank becomes a country's largest stockholder? The Bank of Japan holds ¥37 trillion ($240 billion) in ETFs at book value, over 7% of the entire Tokyo Stock Exchange's market capitalization. Now it has begun selling them off, at a pace that will take 112 years to complete. It is the final and most extraordinary piece of the world's boldest monetary experiment.

The BOJ's ETF Sell-Off Has Officially Begun

On February 3, 2026, the Bank of Japan revealed through its regular balance sheet report that it had started selling its exchange-traded fund (ETF) holdings in January. The first month's sales amounted to ¥5.3 billion at book value for ETFs and ¥100 million for real estate investment trusts (REITs). While the amounts are modest, this first step marks a watershed moment in Japanese monetary policy history.

The BOJ unanimously decided to begin market sales of its ETF and REIT holdings at its September 19, 2025 monetary policy meeting. The announcement initially sent the Nikkei 225 tumbling more than 800 points intraday, but markets regained composure once the extremely gradual pace of disposals became clear.

How Did a Central Bank End Up Owning This Much Stock?

The BOJ's ETF purchases began in 2010 under Governor Masaaki Shirakawa as an unprecedented response to the devastating combination of yen appreciation and stock market decline following the 2008 global financial crisis. The initial annual purchase limit was a modest ¥450 billion.

Everything changed in 2013. Under Governor Haruhiko Kuroda, the "Quantitative and Qualitative Monetary Easing" (QQE) program, commonly known as "Abenomics", dramatically expanded ETF buying. During the COVID-19 shock in 2020, the annual purchase limit was raised to ¥12 trillion, accelerating accumulation to levels no other major central bank has ever approached.

By September 2025, the BOJ's ETF holdings had ballooned to ¥37.19 trillion at book value and an estimated ¥83.2 trillion at market value. The central bank had effectively become Japan's single largest equity holder, controlling over 7% of the total market capitalization of companies listed on the Tokyo Stock Exchange, a situation without parallel among the world's major central banks.

The 112-Year Disposal Plan

The BOJ's sell-off framework operates on strikingly cautious parameters. Annual ETF sales will proceed at roughly ¥330 billion at book value (approximately ¥620 billion at March 2025 market prices). REIT sales will total about ¥5 billion at book value per year. The total annual sales represent just 0.05% of total trading volume on the Tokyo Stock Exchange Prime Market, designed to avoid any disruptive impact on prices.

At this pace, a simple calculation shows it will take approximately 112 years to fully dispose of the holdings. Governor Kazuo Ueda himself acknowledged at a press conference that he intends to "steadily sell over more than 100 years" and admitted he "won't be around to see it through." He also stated that the BOJ does not envision purchasing ETFs again as a future easing tool.

The framework does include flexibility provisions: sales can be temporarily adjusted or suspended during periods of market instability, and the annual pace may be revised in the future.

The ¥50 Trillion Question: What Happens to Unrealized Gains?

One of the most politically charged aspects of this story involves the massive unrealized gains sitting on the BOJ's balance sheet. Based on an estimated average acquisition price equivalent to roughly 19,000 on the Nikkei 225 and current market levels around 45,000, the unrealized profits on the ETF portfolio are estimated to exceed ¥50 trillion ($320 billion).

As sales proceed, these gains will be realized and eventually flow to the national treasury through the BOJ's annual accounts. However, with annual sales limited to about ¥330 billion at book value, the actual profits realized each year remain relatively small, roughly ¥450 billion at current price levels.

Complicating matters, the BOJ also holds massive amounts of Japanese government bonds on its balance sheet. As interest rates rise, unrealized losses on those bonds will expand. Combined with increasing interest payments on bank reserves, the ETF sale profits may effectively be consumed by rising funding costs rather than becoming a windfall for public finances.

Despite these constraints, political voices are already emerging that call for channeling the unrealized ETF gains toward economic stimulus, defense spending, or social security funding, setting the stage for potential friction between the BOJ's independence and political ambitions.

Market Impact: How Much Should Investors Worry?

While the initial announcement triggered a brief sell-off, most market participants consider the ongoing impact to be minimal. The annual sales volume amounts to just 0.05% of Prime Market trading turnover. For context, corporate share buybacks run at approximately ¥11.8 trillion annually, and foreign investor net purchases at about ¥4.2 trillion, dwarfing the BOJ's sales by orders of magnitude.

However, specific stocks where the BOJ has accumulated large indirect positions through ETFs may face selling pressure. Stocks with high weightings in the Nikkei 225 and TOPIX indices deserve particular attention, as ETF disposals mechanically require selling the underlying constituent shares.

A broader concern relates to corporate governance. As Japan's largest shareholder, the BOJ has effectively been a "silent owner," delegating all voting rights on underlying shares to ETF managers without clear guidance. Having this arrangement persist for over a century raises questions about market integrity and management accountability. Governor Ueda has signaled the BOJ will consider its approach to stewardship of these holdings going forward.

A Global Experiment in Monetary Policy Exit

The BOJ's direct purchase of equity ETFs stands as arguably the most unconventional tool deployed by any major central bank in modern history. How Japan navigates this exit will carry implications far beyond its borders, informing the global debate about how far central banks should go in supporting asset prices during crises and how they can safely withdraw that support afterward.

Within Japan's broader monetary normalization, the ETF sell-off represents the final piece of the puzzle, following the end of negative interest rates and the tapering of government bond purchases. With the policy rate raised to 0.75% in December 2025, the BOJ is methodically working toward balance sheet normalization.

Over a 112-year horizon, the world economy and Japanese stock markets will undergo transformations impossible to predict. A severe market downturn could evaporate the current unrealized gains. Conversely, continued stock price appreciation might mean the portfolio's market value barely shrinks despite ongoing sales, a paradox of the ultra-gradual approach.

How to unwind the legacy of unprecedented monetary easing? The BOJ's 112-year journey has taken its very first step.

What do you think about central banks directly intervening in stock markets? If your country's central bank held a massive equity portfolio, what kind of debate do you think it would spark? We'd love to hear perspectives from your part of the world.

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