The Bank of Japan (BoJ) has completed the offloading of bank shares that it began acquiring in response to the financial crisis. The bank now plans to focus on exchange-traded funds.
Completion of Bank Share Offloading
According to the BoJ’s balance sheet, shares acquired from banks declined from 2.5 billion yen ($17.4 million) in early July to zero by July 10. The bank had aimed to finish the offloading by March next year. The BoJ has experienced a continuous decline of approximately 10 billion yen in bank shares monthly in recent years.
Shift to ETFs
During the COVID-19 pandemic, the Bank of Japan became the largest holder of Japanese stocks and increased its ETF holdings by fifteen times compared to bank shares. The bank currently holds about 37 trillion yen ($242 billion) in ETFs. If the BoJ maintains its offloading pace, it would take over 200 years to liquidate its current ETF holdings.
Comments from Governor Kazuo Ueda
“It fulfilled the intended objective. Offloading isn't completely finished yet, but so far it’s been proceeding without negative market impact or financial loss for us. As I have said many times, there is no change in our stance to take time to consider what to do with the ETF holdings.” - Kazuo Ueda, Governor of the Bank of Japan.
By completing the offloading of bank shares, the Bank of Japan is moving towards normalizing its monetary policy, which includes potential interest rate reductions and asset reductions. This marks a crucial step towards the sustainability of the nation’s financial system.
