Japan is preparing for one of the slowest exits from stimulus measures in history. Starting next month, the Bank of Japan will begin selling ETFs worth over $500 billion. They will do this as cautiously as possible.
The speech is about a portfolio of funds that the regulator has accumulated over the years. As of the end of September, its market value reached 83 trillion yen, while the book value was 37.1 trillion yen. The gap has widened amid a rally in the Japanese stock market, and this makes the exit process particularly sensitive.
Sales are stretched over decades
The plan was approved at the Bank of Japan's board meeting in September. The regulator intends to sell only 330 billion yen per year. At the current pace, it would take about 112 years to fully unwind the program.
Inside the bank, this strategy is referred to as 'almost invisible' to the markets. A similar approach was used in the 2000s when the regulator sold shares bought from troubled banks for about ten years. That process ended without market upheaval, and now Japan hopes to repeat this scenario.
At the same time, sales may be suspended in the event of a systemic shock comparable to the 2008 crisis. This point is specifically noted in the regulator's plans.
Who will handle the sales
The Bank of Japan has already decided on the operator for the program. The auction was won by Sumitomo Mitsui Trust Bank. This means that the technical preparations are complete and the exit process is effectively starting, despite the unstable backdrop in global markets.
The regulator emphasizes that it will adhere to a stable monthly pace and will not accelerate sales even in favorable market conditions.
Asian markets under pressure
Against this backdrop, markets in the Asia-Pacific region started the week with declines. Investors are reacting to weak data from China and the ongoing pullback from the AI sector.
In South Korea, the Kospi index fell by 2.16%, and the Kosdaq lost 1.17%. SK Hynix shares dropped by more than 4%, Samsung Electronics — by 3.3%. The Japanese Nikkei 225 fell by 1.3%, and the Topix — by 0.27%.
Additional pressure came from statistics from China. Retail sales in November rose by only 1.3% year-on-year against a forecast of 2.8%. Industrial production added 4.8% compared to the expected 5%.
Sentiment in Japan remains resilient
Despite the external backdrop, Japan's internal indicators look more stable. The Tankan index for large manufacturers rose to +15 in the fourth quarter — a four-year high. The previous value was +14, which is what analysts expected.
The index for the services sector reached +34, confirming resilient business sentiment in the world's fourth-largest economy.
What does this mean for the markets
Japan is betting on extreme caution. The regulator does not want a repeat of sharp movements that in the past led to global volatile spikes.
A slow exit from ETFs reduces the risk of sudden pressure on the stock markets, but the very fact of starting sales remains an important signal. Especially at a time when investors are already jittery about China, slowing growth, and the reevaluation of the AI sector. The process will be lengthy. And this is precisely its significance.
