Whenever the Bank of Japan (BOJ) makes a move, markets tend to react violently. The shock usually starts in crypto, then ripples through bonds and equities. The most recent example was a few weeks ago, when Japanese short-term government bond yields broke a key threshold.
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This time, Bloomberg reports that the BOJ may begin selling its exchange-traded fund (ETF) holdings as early as January 2026.
The question is: will this spill over into other markets?
At first glance, this sounds like a bombshell.
After all, the BOJ has long been the single largest buyer in Japan’s equity market—a true “whale” that accumulated roughly 7% of total market capitalization, about ¥83 trillion. Now, it is finally preparing to disgorge those assets.
The market’s initial reaction was panic. But once the math is done, the conclusion borders on the absurd.
Under the plan, the BOJ would sell ETFs with a book value of about ¥300 billion per year. At that pace, fully unwinding its position would take roughly 100 years.
What does 100 years really mean?
According to pessimistic projections by Japan’s National Institute of Population and Social Security Research (IPSS), Japan’s population could shrink from around 120 million today to roughly 30 million by 2100.
In other words, by the time the BOJ sells its last ETF unit, Japan’s population may be just one-quarter of its current size. Japanese society by then could resemble a quiet nation dominated by the elderly and robots.
Even more ironically, Japan’s own economic history suggests that this “century-long liquidation” is almost destined to fail.
In a country facing severe demographic contraction and long-term economic stagnation, the probability that the BOJ will be forced to resume money printing and asset purchases to fight recession is far higher than the probability that it can calmly sell equities for decades on end.
The situation mirrors the U.S. Federal Reserve today: quantitative tightening has barely ended, yet market conditions already threaten to force balance-sheet expansion once again.
Seen this way, this three-generation-long selling plan is less about a genuine “exit” and more about political theater—designed to appease hawks and preserve policy credibility. It creates the illusion of “normalization,” while in reality turning the exit mechanism itself into a permanent state.
While the actual supply–demand impact of this century-long sell-off is negligible, the psychological impact on markets is real.
That is because it exposes a truth Japan is least willing to confront: there is no clean way out.
Japan is trapped in an economic deadlock with no perfect solution:
The inflation–rate hike dilemma
To fight inflation—core CPI remains above 2%—the BOJ must raise rates. But with government debt at roughly 260% of GDP, every 1% increase in interest rates translates into a massive surge in debt-servicing costs, potentially overwhelming public finances.
The vicious cycle of yen depreciation and rising bond yields
If rates are not raised, wide interest rate differentials will continue to drive capital outflows, pushing the yen weaker. While this benefits exporters and tourism, it is a nightmare for a consumption economy heavily dependent on imports. Imported inflation has already battered household purchasing power over the past two years. Meanwhile, persistently rising long-term government bond yields pose their own systemic risks.
The shadow of recession
With real wage growth failing to keep pace with inflation, domestic demand remains weak. Any aggressive tightening could become the final straw, tipping Japan back into recession.
This is the BOJ’s reality today.
By announcing a “century-long ETF sell-off,” it attempts to project control. In truth, it likely cannot control all the variables of this train in motion. Sooner or later, some constraints will have to be abandoned. Caught between demographic collapse and crushing debt, this is a last attempt to maintain balance on a tightening rope.
And this struggle is unlikely to last only a hundred years.
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