BOJ decided to unwind its ETF...after we all die

On September 19, 2025, the Bank of Japan made a bold move: it announced a roadmap to unload its massive ETF holdings, a key step in ending years of ultra-loose monetary policy.

With ETF book value at 37 trillion yen and market value soaring to over 70 trillion yen, this signals full normalization after rate hikes and bond reductions. But with sales paced slowly at 330 billion yen annually, it's more a direction than an execution.

Here's a quick breakdown for investors navigating this shift.

The ETF Unwind: A Historic Step

The BOJ's policy board unanimously voted to sell ETFs at 330 billion yen per year (620 billion yen at market value) and REITs at 5 billion yen per year (5.5 billion yen at market value). This completes the three pillars of normalization, following interest rate hikes to 0.5% and reduced government bond purchases. Governor Kazuo Ueda emphasized flexibility, saying sales could adjust or halt for market stability.

Rates Steady, But Dissent Brews

The policy rate stayed at 0.5% for the fifth straight meeting, yet two of nine board members pushed for a hike amid persistent inflation above 2%. U.S. tariffs add uncertainty, questioning the BOJ's grip on high prices. The Nikkei dipped over 1% post-announcement, reflecting jitters over this hawkish tilt.

Massive Holdings Spark Governance Worries

Holding 37 trillion yen in ETFs makes the BOJ a top Japanese stock owner—a rare risk for central banks—raising corporate governance red flags. Post-1990 bubble, quantitative easing ballooned these assets to fight deflation. Now, unwinding could take over 100 years at this pace, as Ueda admitted: "If you do the math simply, it will take more than 100 years."

End Note

The BOJ's ETF sales mark policy normalization's endgame, but slow pacing and board splits highlight ongoing risks. Moreover, ETFs dwarf in scale next to the BOJ's 580 trillion yen in JGBs—over half of Japan's total outstanding balance—fueling "fiscal financing" critiques.

The Bank of Japan’s bold moves on Friday remind us of a critical truth, as former Deputy Governor Amamiya stated on October 20, 2018, at the Japan Society of Monetary Economics: "Of course, once trust in a central bank is lost, even sovereign currencies become unacceptable, as evidenced by examples of hyperinflation."