(Bloomberg) -- Japan’s rapid stock market rally has boosted the value of the Bank of Japan’s holdings of exchange-traded funds to a level that’s comparable to annual national tax receipts, according to an analyst’s estimate.

The BOJ’s ETF holdings surged to a new record of about ¥70 trillion ($466 billion) as of the end of trading Thursday, with about ¥32 trillion of unrealized gains on top of a total book value of ¥37.2 trillion, according to Shingo Ide, chief equity strategist at NLI Research Institute. That came as the Nikkei 225 Stock Average closed at a fresh 34-year high.

The BOJ, the largest single holder of Japanese stocks, is the biggest winner in the market — at least on paper. That streak may continue as some analysts expect the Nikkei 225 to build on its gains this year. The value of the assets, equivalent to Japan’s annual tax revenues, is another headache for Governor Kazuo Ueda as he contemplates the complexity of exiting from the bank’s ultra-easy policy.  

“This is too huge to sell to markets, or to decide what to do with it by the BOJ alone,” Ide said. “The benefits should be given back to the Japanese people. The decision making will require participation from many others including the prime minister’s office, finance ministry and FSA.”

The BOJ hasn’t bought any ETFs this year after only doing so three times in 2023 in an early sign of its slow retreat from highly unconventional policy measures. 

BOJ Deputy Governor Shinichi Uchida said last week it’s natural to discontinue such purchases once the inflation target comes into sight. A majority of economists expect the BOJ to end its negative rate regime by April. 

The central bank began to buy the stock funds in 2010 under former BOJ Governor Masaaki Shirakawa to lower the risk premium in financial markets. The bank bought them aggressively at the height of the market panic that spread in the wake of the pandemic.

Ide estimates that one-third of the bank’s ETF holdings is linked to the Nikkei 225 while the rest is connected to the Topix index.

The BOJ currently pledges to buy ETFs as needed with a ceiling of ¥12 trillion per year. Speaking earlier this month, Ueda said the bank has time to consider what to do with its ETF holdings after deciding whether to keep buying them.  

“I feel the BOJ has some regrets over buying this volume of ETFs,” Ide said. “But it has to clean up what it has done.”

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