In September 2025, the BoJ announced the unwinding of its total ETF purchases by roughly US$2.5 billion ($3.24 billion) annually, out of its book value holdings of JPY37.1 trillion ($316 billion). The market value of the BoJ’s holdings is estimated at JPY85 trillion. So far, the looming sales have not affected Japanese stock prices. Why?
On Dec 29, 1989, the Nikkei 225 stock index reached an intraday high of 38,957.44 points, having grown sixfold during the decade. That day marked the end of the Japanese bubble, which began in 1985 when the yen weakened to a record low of 260 against the US dollar in February, causing the September Plaza Accord to increase the rate “voluntarily”. The rapid appreciation of the yen to 123 by November 1988 saw a massive rise in real estate and stock market prices, when Japan reported GDP growth of 6.7% that year. In the Lost Decades after 1990, Japanese growth averaged around 1% per year, even as the population began to age and the stock market began to fall to a record low, to 7,695 points by February 2009, before recovering to its 1989 peak in December 2024.
The stock market was so weak that beginning in 2011, the Bank of Japan (BoJ) started buying Nikkei 225 exchange-traded funds (ETFs), and owned as much as 75% of all Nikkei 225 ETFs issued by 2017. By 2021, it owned roughly 10% of the free float of Nikkei 225 stocks. Buying stock ETFs and massive Japanese government bonds (JGBs) was the Abenomics quantitative easing policy launched by the legendary BoJ governor Haruhiko Kuroda to revive the Japanese economy. The BoJ shifted the huge JGB portfolio out of the long-term pension funds to its books, causing the outflow of yen funds to earn higher US interest rates and dividends.
