Bank of Japan Maps Slow ETF Sales Spanning Over a Century
- BOJ plans an ultra-slow ETF exit to reduce volatility and preserve market stability.
- At the current rate, the ETF exit could stretch across more than one century quietly.
- Officials may pause sales if a crisis threatens financial stability in worldwide systems.
Japan’s central bank is preparing one of the slowest policy exits ever attempted, as it plans to start selling more than $500 billion in exchange-traded funds next month. The Bank of Japan agreed to sell ETFs at a pace of ¥330 billion per year, a speed designed to keep market impact nearly invisible during a tense period for global investors.
Officials finalized the strategy during a September board meeting, aiming to unwind years of unconventional stimulus without repeating past episodes of market instability. At the end of September, the BOJ held ETFs worth ¥83 trillion at market value, while their book value stood at ¥37.1 trillion.
At the planned pace, the divestment would take about 112 years if conditions remain unchanged, making it one of the longest balance sheet reductions ever outlined. The central bank stressed that it will not rush sales, especially while traders worldwide remain sensitive to policy shifts and sudden liquidity changes.
A Sale Designed to Be Nearly Invisible
The BOJ plans to base its ETF sales on book value rather than market value, keeping the annual pace steady at ¥330 billion. By moving slowly, officials aim to ensure that daily trading volumes absorb the sales without triggering sharp price swings or liquidity disruptions.
According to people familiar with internal talks said the bank wants the sales flow to feel almost invisible to investors. The approach mirrors the BOJ’s strategy in the 2000s, when it spent about a decade selling stocks acquired from struggling banks.
Those earlier sales ended in July without a market accident, reinforcing confidence in a gradual and predictable exit process. If a crisis similar to the 2008 Global Financial Crisis emerges, the BOJ may pause the ETF sales to protect financial stability.
Markets React as Asia Watches Closely
The ETF exit plan comes as markets across Asia show signs of strain following weakness in U.S. equities late last week. On Friday, Wall Street fell as investors pulled back from the artificial intelligence trade, prompting caution across global portfolios.
One regional portfolio manager described the session as a value-outperforms-growth day, noting widespread hesitation around AI-linked assets. Asian markets followed lower on Monday, with South Korea’s Kospi dropping 2.16% and the Kosdaq sliding 1.17%.
SK Hynix fell more than 4%, while Samsung Electronics declined 3.3% as technology shares faced selling pressure. Meanwhile, traders waited for China’s November data on retail sales, fixed asset investment, and industrial output to guide regional risk appetite.
Related: Japan Introduces New Liability Reserves for Crypto Exchanges
Policy Normalization Signals a Broader Shift
Japan also released its fourth-quarter Tankan survey on Monday, offering fresh insight into domestic business sentiment. The index for large manufacturers rose to +15, the strongest reading in four years and slightly above the previous +14 level.
According to a survey, economists had expected the index to remain unchanged, making the improvement a positive surprise. The non-manufacturing index reached +34, reflecting solid confidence across services and other sectors of the economy.
Investors now watch the BOJ’s ETF sales alongside its upcoming rate decisions for clues about Japan’s long-term economic direction. As the central bank reduces its balance sheet, could this ultra-slow exit reshape Japan’s markets without unsettling the global financial system?
