In a significant shift in its monetary policy, the Bank of Japan’s policy board unanimously voted to begin the gradual offloading of around ¥335 billion ($2.4 billion) annually in exchange-traded funds (ETFs) and Japan real estate investment trusts. This decision marks a pivotal change in the central bank’s strategy, aimed at reducing the size of its substantial balance sheet.
Following the announcement, the Japanese stock market reacted promptly, with the benchmark Nikkei 225 index experiencing a decline of approximately 1%. Concurrently, the yen saw a strengthening against other currencies, reflecting immediate market adjustments to the news.
The Bank of Japan has been engaged in purchasing ETFs since 2010 as part of its broader monetary easing initiatives, aiming to stimulate the economy in the face of persistent challenges. The program gained momentum under the leadership of former BOJ Governor Haruhiko Kuroda, leading to a considerable expansion in the volume of ETF purchases. As of this month, the book value of the Bank’s ETF holdings had reached an impressive ¥37.1 trillion, underscoring the scale of its involvement in the market.
The decision to start offloading these assets signals a potential shift towards normalizing monetary policy, as the Bank of Japan grapples with balancing economic growth against the backdrop of persistent inflation and other financial pressures. Market analysts will be closely monitoring the implications of this move, particularly how it might impact investor confidence and broader economic conditions in Japan.
