# Bank of Japan Holds at 1.25% and More Than Doubles the Pace of Its ETF Sales

The central bank will sell ¥860 billion a year at book value from January 2027, which would cut the time needed to empty its equity holdings from about 112 years to 43.

- Published: 2026-10-31T05:13:16.885Z
- Canonical: https://polylog.news/2026-10-31/bank-of-japan-holds-at-1-25-and-more-than-doubles-the-pace-o
- Publisher: Polylog (Global desk)
- Section: macro
- Sources: [Investing.com](https://www.investing.com/news/economy-news/boj-speeds-up-etf-sales-potentially-boosting-funding-for-takaichis-plans-4989085), [Bank of Japan](http://www.boj.or.jp/en/mopo/mpmdeci/mpr_2026/mpr261030c.pdf), [The Japan Times](https://www.japantimes.co.jp/business/2026/10/30/companies/food-price-hikes-november/)

The Bank of Japan's policy board voted 8 to 1 on Friday to [keep the overnight call rate at around 1.25%](https://www.tribuneindia.com/news/business/boj-keeps-policy-rate-unchanged-at-1-25-raises-annual-etf-sales-pace-to-860-billion-yen). It also voted unanimously to raise the annual pace of sales from its holdings of exchange-traded funds (ETFs) to ¥860 billion at book value, from ¥330 billion. At market value, the new pace is about ¥2.46 trillion a year. The faster pace takes effect in January 2027, and the bank said it could temporarily adjust or suspend sales depending on market conditions. The bank also published an [updated schedule for its government bond purchases](http://www.boj.or.jp/en/mopo/mpmdeci/mpr_2026/mpr261030c.pdf) for October to December.

The sales have a fiscal dimension. [Investing.com, citing Bloomberg](https://www.investing.com/news/economy-news/boj-speeds-up-etf-sales-potentially-boosting-funding-for-takaichis-plans-4989085), reported that faster disposal could raise non-tax revenue to help fund Prime Minister Sanae Takaichi's spending plans. The ETFs carry large unrealized gains because the bank bought them at much lower prices during more than a decade of easing.

Japan's households continue to face higher prices. [The Japan Times reported](https://www.japantimes.co.jp/business/2026/10/30/companies/food-price-hikes-november/) that nearly 1,500 food and beverage items will rise in price in November, including Kewpie mayonnaise and Asahi's Mitsuya Cider. The bank's rate remains well below inflation of that kind, so real policy rates stay negative.

## What this means

The Bank of Japan is converting a monetary experiment into a fiscal asset. Gains from equities bought with newly created money will flow to the Treasury and fund government spending, so the central bank's balance sheet finances the state indirectly while the policy rate stays below inflation. Japanese savers are exposed through the yen's purchasing power. Japanese equities face slow but known selling, which the market treats as manageable because 43 years is a long schedule. The consensus may underestimate the fiscal incentive: a government that relies on these gains will want the bank to sell into strength and to keep rates low enough to support prices. The precedent is Hong Kong's disposal of equities it bought during the 1998 intervention, which it sold through the Tracker Fund in 1999 without disrupting the market. The desk's read is that the ETF sales will not move Japanese equities much, but the bank's reluctance to raise rates while food prices climb will keep the yen weak against the dollar for months. A rate increase at the December meeting would prove that read wrong.

## What to watch

- The single dissent at Friday's meeting and whether more members favor a rate increase in December. More hawkish votes would support the yen.
- The Takaichi government's supplementary budget. Explicit reliance on ETF gains would confirm that the sales serve fiscal goals.
- Japan's core inflation reading for November. Food price increases at this scale would widen the gap between inflation and the policy rate.