The market value of the Bank of Japan¡¯s holdings of exchange-traded funds reached a record high at the end of September, according to its first financial statement since deciding to start offloading the assets.
The total value of the BOJ¡¯s ETFs rose 18.5% to ?83.2 trillion ($532 billion) from a year earlier during the first six months of fiscal 2025, according to the central bank¡¯s financial report Wednesday. Of that total, a record ?46 trillion came from paper gains on the holdings, thanks to a stock rally.
The report follows the BOJ¡¯s decision in September to gradually sell all the stock funds, a process that it sees taking more than 100 years. The paper gains suggest the likelihood that the central bank will generate a stable source of revenue for the government over time as most of the BOJ¡¯s profits will go into the national coffers after accounting for relevant expenses.
The bank¡¯s revenues from ETF dividends reached ?1.5 trillion, rising by 18.7% compared with 12 months ago and continuing as a major revenue source for the bank.
The BOJ started buying its mountain of stock funds in 2010. The purchases were expanded considerably at the launch of the bank¡¯s massive monetary easing program in 2013. The bank scrapped its ultra loose policy in March last year.
The BOJ announced it would sell its ETFs at a pace of ?330 billion per year by book value at the end of a September policy meeting to minimize the market impact from the selling. That could start early next year, a person familiar with the matter told Bloomberg at the time.
While the central bank has logged increasing paper losses on its huge government debt holdings, its haul of ETFs has produced major unrealized gains.
Japan¡¯s Nikkei stock index has stayed on a rising trend amid ongoing market expectations for fiscal spending and rate cuts by the Federal Reserve. The index rose roughly by a quarter so far this year, trouncing the 11% gain of the Dow Jones Industrial Average.
The bank¡¯s unrealized losses from bond holdings expanded to ?32.8 trillion, almost 2.5 times the level of a year ago as bond yields continue to rise on the back of speculation for further BOJ rate increases and concerns over Japan¡¯s fiscal health.
The yield on benchmark 10-year bonds hit 1.835% last week, the highest since 2008.
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