Bank of Japan in no rush to sell risky asset holdings
(The entire reason for BoJ having to buy them was they were dropping in value and no one in size was/were buying so now they have assets that are at record highs because they’ve printed yen to buy them so the winners were the Japanese banks that are legacy holders. Can look at this 2 ways: they’re almost finished selling them-off book because the open market could NOT handle this size of volume and highly unlikely or they keep them as they own the entire space and can use dividends flowing to govt to justify holding them. They are limited to what they can do with them and unfortunately if they manage to sell them-to whom is a BIG question-the proceeds go to the Government so they’ll probably spend it on educational programs for trans-gender holistic harmonica repair/technician degrees)
Bank of Japan Governor Kazuo Ueda said the central bank had no immediate plan to sell its huge holdings of exchange-traded funds (ETFs), which is drawing increased attention as a potential source of revenue to fund government initiatives. "We must spend some time in deciding what to do with our ETF holdings, including whether to unload them in the future," Ueda told parliament on Friday.
The remarks come amid growing debate about how the BOJ should best deal with the legacy of the its efforts to end deflation with heavy money printing, which left it with a huge balance sheet. The BOJ ended eight years of negative interest rates(barely! but still negative adjusted for inflation)other remnants of its radical stimulus programme in March, including a framework to buy risky assets such as ETFs that had been in place since 2010. But the central bank has yet to lay out a plan to unload its huge holdings of ETFs and government bonds partly out of concern of destabilising financial markets.
The BOJ holds about 37 trillion yen ($237 billion) worth of ETFs. Private estimates put the market value of the holdings at roughly 67 trillion yen as of January, which means latent profits would be around 30 trillion yen.
With the BOJ moving toward normalising monetary policy,(a raise of 1/10% is NOT normalizing when our FFR IS 5.25-50%)some politicians and market players have flagged ideas on how to unload its huge ETF holdings or tap the proceeds for spending. Japan's biggest opposition party, the Constitutional Democratic Party of Japan, has proposed using the dividends from the BOJ's ETF holdings to fund childcare spending.
Ken Shibusawa, a private-sector member of a government panel, has called on the government to set up a special fund that would buy the BOJ's ETFs in exchange for perpetual bonds. The BOJ currently pays profits it earns, including from the ETF dividends, to state coffers. The government has not said how the BOJ's ETF holdings could be used in the future. The only thing the BOJ has power to decide is whether to sell its ETF holdings or not. It has no say on how the proceeds could be used," said former BOJ executive Kazuo Momma. “Unless the government comes up with a clear idea, the hurdle for deciding on the fate of ETF is quite high."
https://www.reuters.com/markets/asia/boj-has-no-immediate-plan-sell-etf-holdings-governor-ueda-says-2024-05-17/
From 2022
A $430 Billion Cautionary Tale Inside Japan’s Central Bank
The world's boldest monetary policy experiment landed the Bank of Japan with a vast portfolio it just can’t quit. Such wide-ranging goals have led the Japanese central bank to amass a whopping 80% of the country’s ETFs—equivalent to about 7% of its $6 trillion stock market—in less than a decade. That’s far further than any other central bank in the world has gone in trying to prime its economy via equities purchases. The Bank of Japan has also outpaced peers with its $3.7 trillion in net bond purchases.
https://www.bnnbloomberg.ca/a-430-billion-habit-got-japan-s-central-bank-hooked-on-etfs-1.1749440