📉 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's begun selling them off… at a pace that will take 112 years to complete. Welcome to the world's most extraordinary monetary policy exit.
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.
References
- https://www.nikkei.com/article/DGXZQOUB031FQ0T00C26A2000000/
- https://www.boj.or.jp/mopo/mpmdeci/mpr_2025/k250919a.pdf
- https://www.japantimes.co.jp/business/2025/12/16/economy/boj-etf-holdings-sell/
- https://www.dir.co.jp/report/research/capital-mkt/securities/20250922_025321.html
- https://cetex.org/news/the-boj-must-define-a-strategy-for-its-etf-holdings-not-just-its-sales/
- https://www.nomura.co.jp/wealthstyle/article/0450
Reactions in Japan
January sales of ¥5.3 billion... the annual plan is ¥330 billion which should be about ¥27.5 billion per month. Seems like they're still in 'testing the waters' mode. Full-speed selling probably starts February onward. Either way, 0.05% is basically a rounding error.
ETF selling news dropped and the Nikkei didn't even flinch lol. I panicked during the surprise announcement in September, but it's fully priced in now. Today's real story is Trump's tariffs honestly.
112 years sounds like a joke, but this really is the optimal solution for the BOJ. Dumping everything would cause a market panic, but holding forever isn't healthy for a central bank either. It's unglamorous but historically significant.
There's ¥50 trillion in unrealized gains but none of it goes back to the people, right? Pensions shrinking, insurance premiums rising, consumption tax hike coming eventually. Where does the BOJ's profit actually disappear to? We deserve an explanation.
More than market impact, I'm worried about voting rights. The BOJ being an indirect major shareholder of Japanese companies for 100 years without any governance input is abnormal. Could face international criticism from an ESG perspective too.
Hmm, a few stocks in my portfolio have high BOJ indirect ownership through ETFs. ¥330 billion a year shouldn't matter much, but psychologically it's uncomfortable knowing they're gradually being sold off.
Started by Governor Shirakawa in 2010, massively expanded by Kuroda, and now being sold by Ueda. An ETF policy saga spanning three governors. And it won't end until the late 22nd century... it's so epic it reads like a novel.
The 'BOJ put' isn't really dead, is it? They explicitly said they'll suspend selling during market turmoil. They won't buy, but they'll stop selling. That's still effectively providing a floor.
112 years is longer than the time from the Meiji Restoration to today. We don't even know what Japan will look like by then, and they're making plans? In a way it's impressive, in another way it's irresponsible...
Sumitomo Mitsui Trust Bank apparently won the auction to handle the ETF sales. That's a pretty sweet deal — basically guaranteed business for 100+ years. Trust fees alone must be substantial.
Honestly, as someone doing index fund investing through NISA, it's a bit worrying that the BOJ is now on the selling side. But at just a few billion yen per month, it's negligible. Hearing that individual investor inflows are way larger was reassuring.
Hearing some ruling party members want to use ETF unrealized gains for childcare funding. That would destroy BOJ independence entirely. Seeing the Fed under Trump's pressure, I hope the BOJ stands firm.
Freaked out seeing the BOJ ETF selling news, but after researching, the annual sales are tiny compared to total individual investor purchases. Glad I didn't panic sell. Learned something today.
The BOJ's ETF disposal will become a global precedent for central bank exit strategies. The ECB bought corporate bonds but not equity ETFs. The success or failure of this ultra-long-term scheme will directly affect future policy options worldwide. A case study worth watching.
The 112-year completion premise is fundamentally flawed. Market crashes trigger suspension, while rising prices mean sales don't shrink the balance. This plan might literally never end. Is this an exit strategy or a maze?
As a former hedge fund manager, the 112-year disposal plan is genius. It's effectively 'doing nothing' while officially claiming to 'be heading for the exit.' There's almost a bureaucratic beauty to it.
From a Chinese investor's perspective, the BOJ's ETF dilemma is enviable. A 'problem' with ¥50 trillion in unrealized gains? That's a dream scenario. China's state-owned enterprise cross-shareholdings are far more complex and problematic.
This confirms the ECB was right not to follow the BOJ into ETF purchases. Once you start, you can't stop, and the exit takes 112 years. If Europe had done the same, it would've become a euro credibility crisis.
India's RBI has maintained a policy of no direct equity market intervention. The BOJ case is becoming a textbook example of 'what happens when central banks touch equities.' Could easily be a case study in MBA programs in Mumbai.
Bond trader in London here. More worried about the yen carry trade unwind than the ETF sales themselves. The more the BOJ normalizes, the higher the yen appreciation risk, potentially triggering another global risk-off event like August 2024.
I teach central banking at a Polish university and plan to add the BOJ ETF sell-off to the curriculum. There's no clearer illustration of the lesson that 'entry into unconventional policies is easy, but exit is extraordinarily difficult.'
As an Australian pension fund manager, this actually makes me slightly more bullish on Japanese equities. BOJ sales are negligible, corporate buybacks are massive. The governance reform story matters far more than this.
Korean securities analyst here. Even with BOJ ETF selling starting, foreign investors are still net buyers of Japanese stocks. The real concern isn't the BOJ but Trump tariffs triggering global risk-off. That affects both Japanese and Korean markets far more.
Brazil's policy rate is over 12%, and Japan calls 0.75% 'tightening' — always feels surreal. And a central bank owning stocks? If Brazil's central bank did that, there'd be absolute chaos.
Sweden's Riksbank also implemented unconventional policies but never touched equity ETFs. Seeing the BOJ case confirms that was the right call. Though I must admit, the design of the BOJ's ultra-cautious exit strategy is quite elegant.
From a Dubai asset management firm's perspective, the BOJ's ¥50 trillion unrealized gain rivals Middle Eastern sovereign wealth funds in scale. But the mandate is completely different. A central bank shouldn't hold an equity position this large.
Canadian retail investor here. I hold Japan ETF (EWJ) in my portfolio. For foreign investors, yen appreciation matters more than BOJ selling. As the BOJ normalizes, stronger yen = better USD returns. Could be a contrarian opportunity.
As an Italian economics journalist, the most intriguing part of the 112-year plan is the 'suspend during market turmoil' clause. They won't sell when stocks crash — meaning they'd hold through declining gains in an endless cycle. This might never actually conclude.
Japanese-Kiwi here in NZ. My family in Japan doesn't invest so they're indifferent, but in Wellington's finance circles the BOJ ETF issue gets real attention. Fund managers worldwide are watching Japan's experiment closely.
Nigerian fintech CEO here. Most African central banks are fully occupied with forex intervention. A central bank becoming a 'giant whale' in the stock market is another world for us. But the lessons about limits of unconventional policy are universal.
From a Swiss banker's perspective, the SNB also holds massive foreign equities including US stocks, but buying your own country's equity ETFs is another dimension entirely. The BOJ has become an 'invisible hand' over corporate governance.