- Must think about valuation and market rout risks when offloading ETF holdings
- JGB holdings would continue to have stock effect since reduction pace is extremely slow
He’s answering questions here as the BOJ is nearing the end of fully getting rid of the stocks purchased from struggling banks back in 2002. They then began selling these in 2007 before pausing during the global financial crisis. They then resumed the selling back in 2009 and 2010 until now.
In February, the book value of these stocks were at ¥52.8 billion ($345 million). The BOJ has been reducing them by about ¥10 billion per month in recent times, so that means this should all be done in the next few months – much quicker than their anticipated timeline of March 2026.
Some market players are worried that with the end of the above, it means the BOJ will move on to potentially wind down its ETF holdings. It’s sort of the last piece of the puzzle for the central bank in stepping away from their ultra loose monetary policy stance in general.
But mind you, the BOJ’s ETF holdings are way, way bigger in size with a book value of ¥37 trillion ($242 billion). The market value of those stocks are arguably double that of course. So, how will the BOJ go about in getting rid of that?
If they follow a somewhat similar pace of shedding just ¥10 billion per month, it will take them over 300 years to get rid of their ETF holdings. 🤯
