BOJ’s Historic ETF Unwind Sends Markets and Bitcoin Lower

Bitcoin slipped back to just above $116,000 on Friday after briefly approaching $118,000, as global markets reacted to the Bank of Japan’s announcement of a long-planned unwind of its massive ETF and J-REIT holdings.

The BOJ revealed it will begin selling ETFs and Japanese Real Estate Investment Trusts (JREITs) accumulated since 2010 under its ultra-loose monetary policy, totaling around $250 billion. The central bank plans to sell ETFs with a book value of ¥330 billion ($2.2 billion) per year, equivalent to ¥620 billion ($4.2 billion) at market prices. Governor Kazuo Ueda emphasized the process would be deliberate and gradual, noting it could take over a century to fully dispose of the holdings.

The announcement coincided with a decision to keep the BOJ’s benchmark rate at 0.5% in a 7-2 split vote, reflecting uncertainty over future rate moves. Two members pushed for an immediate hike, amid expectations that tightening could begin as soon as October. Japan’s core CPI rose to 2.7% in August, exceeding the BOJ’s 2% target.

Financial markets reacted quickly: the Nikkei fell over 1%, while the yield on Japan’s 10-year government bond rose to 1.64%. Bitcoin and other cryptocurrencies mirrored the broader risk-off sentiment, pulling back from recent highs.

The developments come against a fragile economic backdrop. Japan’s debt-to-GDP ratio hovers near 240%, with bond yields at multi-decade highs, raising concerns about rising borrowing costs and fiscal sustainability.