Bank of Japan completes sale of stocks acquired during 2000s banking crisis

Bank of Japan completes sale of stocks acquired during 2000s banking crisis

The Bank of Japan (BOJ) has completed the sale of stocks it acquired from besieged banks during the early 2000s and the Lehman Shock, effectively ending a nearly two-decade process [1]. This development brings closer attention to the BOJ's significant holdings of exchange-traded funds (ETFs).

The BOJ's holdings of the shares purchased from banks hit zero as of July 10, having fallen from ¥2.5 billion ($17.4 million) 10 days prior, according to its latest balance sheet report [1]. This milestone was achieved well ahead of the self-imposed deadline of March 2026, though it was anticipated given the steady monthly decline of approximately ¥10 billion in recent years.

The offloading of these shares suggests that the BOJ's broader normalization process could be accomplished without significant market disruption, although it may take considerable time. The assets were originally purchased as a crisis response measure, predating the introduction of the BOJ's extensive monetary easing program [1].

Between 2002 and 2010, the BOJ acquired about ¥2.4 trillion ($16.3 billion) of stocks from private banks to stabilize the financial system during the banking crisis and the global financial crisis [1]. The central bank's actions have since become less extraordinary, with it becoming the largest holder of Japanese stocks by 2020. Currently, the BOJ's ETF holdings are 15 times larger than the shares it obtained from beleaguered banks [1].

Goldman Sachs economists have noted that it is reasonable to expect the BOJ to begin gradually selling ETFs in fiscal 2026 to minimize potential losses and market impacts [1]. The BOJ has been cautiously normalizing policy since the end of negative interest rates and expansionary asset purchases in March 2024, with the latest updates to its government bond buying plan in June [1].

The BOJ's financial health is not immediately threatened by the need to dispose of its stock fund assets, as it earned ¥1.4 trillion in revenue from ETF dividends in the fiscal year ended in March 2025 [1]. This revenue supports the bank's finances at a time when the cost of paying interest to banks is likely to rise further with rate hikes.

The sizable ETF profits have drawn attention from investors and politicians, with some opposition party lawmakers calling for the use of the BOJ's ETFs to fund government finances. Some analysts suggest that the BOJ could distribute the ETFs to the public [1].

Governor Kazuo Ueda has stated that the BOJ's stance remains unchanged regarding the ETF holdings, emphasizing the need to take time to consider the best course of action [1].

References:
[1] https://www.bloomberg.com/news/articles/2025-07-14/boj-finishes-offloading-bank-stocks-bringing-attention-to-etfs
[2] https://www.livemint.com/market/boj-finishes-offloading-bank-stocks-bringing-attention-to-etfs-11752456312126.html