Bank of Japan Raises ETF Sales to 860 Billion Yen a Year

Key Facts

The Bank of Japan will raise its sales of exchange-traded funds to about 860 billion yen a year on a book-value basis, from about 330 billion yen, with the change taking effect in January 2027. The bank said in its decision that the new sales would equal about 0.1% of stock market trading value, after the previous pace was set at about 0.05% of trading at the time. The decision cuts the estimated time needed to unwind the holdings to about 43 years from 112 years, the bank said. It said sales begun in January 2026 had proceeded smoothly, avoiding a significant market impact. The bank linked the faster pace to the increase in stock trading value, while sales of Japanese real estate investment trusts remain at about 5 billion yen a year on a book-value basis.

The decision accelerates the gradual reduction of the central bank’s accumulated stock holdings while keeping sales spread over a long period. In September 2025, the bank had chosen a pace that would make sales equal about 0.05% of trading value, while allowing temporary adjustments to the amounts if market conditions changed. In the minutes of that meeting, one member said disposing of the holdings at the proposed pace could take more than 100 years, and that slow sales could limit their market impact. The adopted principles allow the selling trustee to adjust amounts temporarily in response to market conditions, and also permit sales to be suspended, particularly during a sharp decline in the relevant price indexes. Board member Masu said the bank had based its previous plan on its experience selling shares bought from financial institutions, a process completed in July 2025 after about nine years of continuous sales.

Faster sales could affect the central bank’s profits and transfers to the state treasury, but the bank has not said that the proceeds are directly earmarked to fund government plans. Finance Minister Satsuki Katayama said, "It is clear that a faster pace of ETF sales will generate higher profits and boost the net surplus." She added that the government would assess the potential additional revenue and how to handle it while preparing the next fiscal year’s budget. Reuters reported that part of the bank’s annual net profits, including gains from sales, is paid to the state treasury. The Takaichi administration is seeking non-tax revenue to fund its spending plans while limiting reliance on additional debt issuance, Reuters reported, making any increase in transfers relevant to the budget without implying a direct allocation of the proceeds.

The sales plan was announced alongside the monetary policy decision on October 30, 2026, when the Bank of Japan kept its target interest rate near 1.25% in an 8-1 vote. Board member Takata dissented, proposing a raise to about 1.5%. In its October outlook report, the bank estimated real GDP growth at 0.7% in fiscal 2026 and 2027, then 0.8% in 2028. Its forecasts for core inflation, excluding fresh food, were 2.5% in 2026, 2.6% in 2027 and 2.0% in 2028. The bank raised its 2027 inflation forecast by 0.2 percentage points from its July estimate, while leaving its 2026 forecast unchanged.

The Bank of Japan said price risks were tilted to the upside and that core inflation could exceed its 2% price stability target, with medium- and long-term inflation expectations potentially rising above it. The bank also pointed to a shift in corporate behavior toward higher wages and prices. In currency markets, the yen rose 0.11% to 157.51 per dollar on October 30 and was on track for a third consecutive daily gain after the decision to hold rates and the higher inflation forecasts. At the same time, it was on course for a monthly loss in October. Reuters described the bank’s policy as having entered a more hawkish phase, while leaving the door open to rate increases once every few months.

ETF sales remain part of the bank’s gradual reduction of its presence in the stock market, with the timing and scale of implementation still tied to market conditions under the principles it approved. Board member Masu estimated the book value of the bank’s ETF holdings at about 37 trillion yen and said their size relative to the shares the bank had previously sold explained the cautious approach to unwinding them. The full text of the outlook report is due to be published on November 2, 2026, followed by the Summary of Opinions on November 10. The publications will provide further details on the bank’s assessment of the economy and prices and its policy path.