Goldman Expects BOJ to Slowly Unwind $252 Billion ETF Holdings via Market Sales

Economic

Summary:

Goldman Sachs predicts that the Bank of Japan will gradually sell its massive ETF portfolio through open market operations instead of transferring it to public or government entities...

BOJ Expected to Pursue Cautious ETF Exit Strategy Through Gradual Market Sales

Goldman Sachs analysts forecast that the Bank of Japan (BOJ) will opt for a measured, long-term plan to reduce its 37-trillion-yen ETF holdings valued at approximately 70 trillion yen on the market through small-scale sales in the open market, rather than pursuing more disruptive alternatives like transferring assets to public or government-controlled entities.

The BOJ has remained vague about the timeline and mechanism of offloading the ETFs it amassed during 13 years of aggressive asset purchases as part of its ultra-loose monetary policy. While ETF buying officially halted in 2024, the central bank continues to face mounting pressure over the exit strategy for what now amounts to $252 billion in book value assets, with market value nearly double that amount.

Key Objectives: No Losses, Minimal Market Distortion, Price Stability

Goldman’s report, authored in part by Akira Otani, a former BOJ official and financial markets department head, emphasizes that any exit plan must meet three critical conditions outlined by the BOJ: avoid realizing losses, minimize market volatility, and maintain appropriate selling prices. According to Goldman, a gradual divestment strategy in the open market is the only practical method that aligns with all three objectives.

While some experts have suggested more aggressive or centralized options such as transferring the ETFs to government-backed institutions or redistributing them to the public Goldman views such alternatives as either politically complex or potentially destabilizing for markets.

Proposed Timeline: Fiscal 2026–2027 Onward

The report proposes that the BOJ could begin its divestment around fiscal 2026 or 2027, at an annual pace of approximately 600 billion to 1 trillion yen in book value. This slow, steady rhythm would reduce risks of flooding the equity market and provide time for investors to absorb the sales.

BOJ Governor Kazuo Ueda has maintained a cautious stance, stating that the bank needs further time to study the most appropriate strategy. The prolonged silence suggests that internal debate is ongoing and that any hasty action could undermine financial stability, especially given the BOJ’s influential presence in Japan’s equity markets.

Market Implications: Delicate Balance Between Exit and Stability

If the BOJ proceeds with Goldman’s forecasted strategy, Japanese equities could avoid short-term shocks, though the overhang of future ETF sales may weigh on sentiment. Conversely, a transparent and pre-communicated schedule could ease investor concerns and reduce volatility, much like the Fed's balance sheet runoff strategy in the U.S.

The BOJ’s handling of this delicate unwind will be a litmus test for post-QE central bank normalization, especially for institutions with large-scale equity exposures. As global central banks retreat from pandemic-era stimulus measures, Japan’s unique challenge will be executing a market-sensitive exit without igniting instability.

In short, while the BOJ’s ETF exit remains on the horizon, the favored path forward appears to be one of patience, gradualism, and precision a reflection of Japan’s signature central banking style.

Source: Reuters

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Blue River

Economic

Forex

On Friday, the USD/JPY pair advanced to 146.93, marking a three-week high as the US dollar continued to strengthen against a backdrop of escalating global trade tensions.

Recent developments in US trade policy have further unsettled markets. US President Donald Trump announced additional tariffs, including a 35% levy on Canadian imports, alongside plans for sweeping 15-20% duties on most other trading partners.

Of particular concern are US-Japan relations, following Trump’s imposition of a 25% tariff on Japanese goods this week, set to take effect on 1 August. The move has intensified bilateral strains, with Japanese Prime Minister Shigeru Ishiba warning of the need to reduce Japan’s reliance on the US in defence, food security, and energy.

Ishiba described the ongoing negotiations as a “battle for national interests”. At the same time, a leading Japanese think tank projected that the tariffs could shave 0.8% off Japan’s GDP in 2025, with a cumulative decline of 1.9% by 2029.

Technical Analysis: USD/JPY

H4 Chart:

The USD/JPY has established a consolidation range around 145.65, now extending to 147.17. A short-term pullback to 145.65 (testing from above) is anticipated, followed by a potential upward wave targeting 147.47 at minimum. This outlook is supported by the MACD indicator, with its signal line firmly above zero and trending upward.

H1 Chart:

A consolidation phase near 146.41 preceded an upward breakout, completing a wave structure at 147.17. A downward correction towards 145.65 is now in view, corroborated by the Stochastic oscillator, where the signal line sits at 80 and points sharply downward.

Conclusion

The yen’s weakness persists amid dollar strength and trade uncertainties, with technical indicators suggesting near-term volatility. Traders should monitor 145.65 as a key support level, while further upside towards 147.47 remains plausible.

Source: ACTIONFOREX

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Daniel Carter

Commodity

Economic

The International Energy Agency on Friday raised its forecast for supply growth this year after Opec+'s latest decision to pump more oil, while it trimmed its outlook for demand, saying that in recent months, oil use has slowed down significantly.

The IEA expects global supply to rise by 2.1 million barrels per day this year, up 300,000 bpd from the previous forecast, the agency, which advises industrialised countries, said in a monthly report.

Opec+ is adding more crude to the market after the group decided to unwind its most recent layer of output cuts in April and accelerate the hikes from May, June, July and August.

Even so, the IEA said that rising refinery processing rates to meet summer travel and power-generation demand were tightening the market.

"Price indicators also point to a tighter physical oil market than suggested by the hefty surplus in our balances," the agency said.

Source: Theedgemarkets

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Gerik

Economic

Commodity

Gold Holds Ground Amid Trump Tariff Threats and Fed Policy Uncertainty

The gold market maintained its upward momentum into Friday, as traders absorbed two key forces: escalating trade tensions initiated by President Donald Trump and an increasingly divided U.S. Federal Reserve over the timing of potential interest rate cuts. The metal traded at $3,334.27 an ounce by 8:15 a.m. London time, extending gains from Wednesday and Thursday but still recovering from an earlier weekly drop.

The rise in gold’s value reflects its traditional role as a safe-haven asset during periods of global uncertainty. President Trump this week proposed sweeping new tariffs targeting countries such as Canada and Brazil, and notably slapped a substantial tariff on copper imports set to take effect August 1. These policy shifts sparked fresh investor concerns about the fragility of global trade and industrial demand, driving money back into gold.

Interest Rate Outlook Remains Divided as Fed Officials Signal Uncertainty

On the monetary policy front, the Federal Reserve has so far maintained steady interest rates in 2025, but internal disagreements have started to surface. Mary Daly, President of the San Francisco Fed, reiterated her view that two rate cuts are still possible this year, citing confidence that the inflationary effects of tariffs might be milder than markets fear.

Lower interest rates tend to favor non-yielding assets like gold by reducing the opportunity cost of holding them. This prospect, combined with Trump's aggressive stance on trade, has led to continued speculation that the Fed may have to ease policy in response to a cooling global economy or deteriorating sentiment.

Gold’s Rally Fueled by Multiple Drivers

The latest uptick in gold comes after a sharp rally earlier this year, when prices breached $3,500 an ounce in April, fueled by central-bank purchases, geopolitical instability, and dovish expectations from global monetary authorities. So far in 2025, gold has gained over 25%, making it one of the best-performing assets in a volatile macroeconomic environment.

Traders now eye both macroeconomic data releases and any signals from upcoming Fed meetings to refine their expectations. At the same time, the Trump administration's unpredictable trade policies continue to act as a source of volatility, strengthening gold's appeal as a risk hedge.

Broader Precious Metals Market Mixed

In other metals markets, silver prices edged higher, benefiting from both industrial and haven demand, while platinum and palladium slipped, reflecting lingering concerns over global auto production and industrial consumption. The Bloomberg Dollar Spot Index, a key gauge of dollar strength, rose 0.2%, capping further upside for dollar-denominated commodities like gold.

Gold's continued resilience underscores a fragile risk sentiment across global markets. As long as Trump's tariff strategy injects uncertainty into trade flows and the Federal Reserve remains ambiguous about its policy path, gold is likely to maintain a strong floor, with traders watching closely for signs of renewed upside toward April’s highs.

Source: Bloomberg

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Gerik

Economic

White House Pressure Mounts on Powell as Fed Independence Faces New Test

Federal Reserve Chair Jerome Powell is facing intensified political pressure as top officials in the Trump administration, including Office of Management and Budget (OMB) Director Russell Vought, openly criticize his leadership. The latest flashpoint revolves around a costly and controversial renovation project of the Fed’s Washington, D.C. headquarters, now projected at $2.5 billion a 30% increase from earlier estimates.

Vought, a close Trump ally, publicly posted a letter addressed to Powell in which he denounced the renovation as “ostentatious” and financially irresponsible, citing features like rooftop gardens, VIP dining rooms, and luxury elevators. He questioned Powell’s Senate testimony denying the presence of such features and implied the Fed was non-compliant with the National Capital Planning Act, raising the possibility of a legal breach requiring construction to halt.

The accusations come at a moment of escalating friction between Powell and the Trump White House. President Trump has repeatedly demanded sharp interest rate cuts, claiming they are essential to reflect U.S. economic strength. He has gone so far as to publicly call for Powell’s resignation and has encouraged Congress to investigate the Fed Chair for alleged misconduct.

Legal Debate: Can the President Fire Powell?

Despite growing calls from Trump officials to remove Powell “for cause,” legal experts note that the Federal Reserve Chair enjoys strong statutory protections. Section 10 of the Federal Reserve Act allows board members to be removed only “for cause,” a vague term traditionally interpreted to mean “inefficiency, neglect of duty, or malfeasance.”

Powell has previously asserted that “not permitted under the law” is the correct interpretation regarding presidential power to fire a sitting Fed Chair, unless a serious breach is legally proven.

Nonetheless, the administration is actively planning for the post-Powell era. With Governor Adriana Kugler stepping down in January, a 14-year board seat will open, and discussions are already underway regarding her replacement. Another opportunity arises when Powell’s chairmanship ends in May 2026, potentially giving Trump a second seat to reshape Fed policy.

Fed Renovation: A Political Lightning Rod

The $2.5 billion renovation of the Fed's headquarters has emerged as a major point of contention. Media reports heavily cited by Republican lawmakers claimed extravagant elements such as marble décor, rooftop terraces, private art installations, and direct elevators to VIP dining areas.

Powell flatly denied these claims during June Senate testimony, describing them as “misleading and inaccurate.” He asserted that the controversial features were never included or had been removed from the current plans.

Still, Vought’s letter argues that Powell’s testimony raised red flags, warranting oversight by the National Capital Planning Commission (NCPC) a body whose leadership now includes Trump loyalists like James Blair, who immediately called for an independent review and site inspection of the renovation project.

What’s at Stake for Monetary Policy and Market Stability

The broader context for this political battle is the administration’s frustration with Powell’s cautious rate-cut strategy. Despite U.S. inflation recently stabilizing just above 3%, Trump has repeatedly asserted that rates must be slashed to reflect economic momentum. He believes the Fed’s current 4.25% rate is impeding growth and has openly urged Powell to “rapidly lower” it.

Yet, Powell has maintained a data-dependent approach. With uncertainty over inflation persistence and global economic volatility including a sluggish European economy and renewed tariffs the Fed has resisted politically motivated rate moves.

The controversy underscores a profound test for central bank independence in the United States. Trump’s growing influence over key appointments, his public threats against Powell, and the politicization of internal Fed matters like building renovations all raise concerns over whether the Fed can maintain its policy neutrality.

With the 2026 chair succession on the horizon and multiple vacancies opening on the Board of Governors, the Trump administration appears poised to reshape the Fed’s leadership, potentially tilting it toward a more aggressive pro-growth, low-rate stance at the possible expense of credibility and long-term price stability.

Source: Yahoo Finance

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Gerik

Economic

Global Maritime Industry Faces Inevitable Green Transition

The global shipping industry is undergoing a profound transformation aimed at achieving net-zero carbon emissions, according to the International Maritime Organization (IMO). This transition encompasses not just vessels, but the entire supply chain, including business models, ports, and the maritime workforce.

As of April 2025, the IMO has approved a new set of regulations focusing on low-carbon fuels and emissions control, slated to come into force by October 2025. However, IMO Secretary-General Arsenio Dominguez emphasized during the Green Finance Forum in Monaco that regulations alone are insufficient. He stressed the need for major investments in clean fuel technologies and alternative energy sources, without which the industry’s decarbonization efforts cannot advance.

Massive Capital Shift into Green Technologies

At the United Nations Ocean Conference held in Nice from June 9 to 13, global calls intensified for public-private investment in clean maritime solutions. One key priority is the development and scaling of carbon-neutral fuels to replace the 350 million tons of heavy fuel oil (mazut) currently used annually in global shipping.

Modernizing port infrastructure and establishing global clean fuel supply chains are also critical. Ports must be equipped to deliver safe and clean energy for ships docking worldwide, aligning maritime transport with broader environmental and climate goals.

Remarkably, the container shipping industry has already begun adapting, with at least 200 vessels capable of operating on near-zero-emission fuels, according to the World Shipping Council. Over 80% of new container and car carrier ship orders now feature advanced hybrid propulsion systems, reflecting a market-wide pivot toward green shipping.

Total investment in decarbonizing container shipping alone has reached $150 billion, a historic milestone for the sector. Dominguez underscored the urgency: “We have spent money polluting the planet now it’s time to invest in cleaning it up and securing a sustainable future.”

Beyond Emissions: Navigating a New Safety Landscape

While environmental concerns dominate the current agenda, the IMO is also focused on maritime safety and cybersecurity, recognizing the evolving complexity of the shipping industry. From June 18 to 27, 176 member states of the IMO’s Maritime Safety Committee met in London to address key challenges such as greenhouse gas regulations, cyber risk management, autonomous vessel governance, and anti-piracy measures.

A particularly notable discussion was the potential expansion of nuclear-powered commercial vessels, prompting a review of safety protocols first adopted in 1981. As nuclear technology becomes more viable in commercial shipping, it introduces cross-border safety and regulatory complexities, underscoring the need for robust governance in this emerging field.

A Turning Point with Shared Responsibility

Experts warn that the rapid pace of technological progress in maritime transport will have a deep impact on the global economy, reshaping trade flows, industrial investment, and regulatory landscapes. The IMO concluded that governments, industries, and civil society all share the duty of protecting the marine environment, not only for today but for generations to come.

“This isn’t just our ocean it’s our shared responsibility and opportunity,” Dominguez declared. As the shipping industry moves into a new era, the choices made today will define the sustainability of maritime trade tomorrow.

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Gerik

Economic

South Korea’s National Debt Surpasses 1,200 Trillion Won for the First Time

According to the Ministry of Economy and Finance, South Korea’s central government debt stood at 1,217.8 trillion won (approximately USD 886.6 billion) in May 2025, marking the first time it has crossed the 1,200 trillion won threshold. This represents a monthly increase of 19.9 trillion won and a year-to-date surge of 61.7 trillion won.

This ballooning debt comes amid slowing revenue growth and aggressive government spending to stimulate the economy. The current debt level is now just 28.3 trillion won shy of the government’s full-year forecast of 1,246.1 trillion won, made after the first supplementary budget. With a second budget already passed in July, the finance ministry now expects the debt to reach 1,267.2 trillion won by year-end. Including local government debt, the total national debt is projected to hit 1,301.9 trillion won.

Revenue Growth Stalls While Expenditures Surge

From January to May, government revenue totaled 279.8 trillion won, up 21.6 trillion won from the same period in 2024. However, the collection rate slowed slightly, with only 42.9% of annual targets achieved, compared to 43.4% last year.

Meanwhile, government expenditure reached 315.3 trillion won, an increase of 4.9 trillion won year-on-year. Of the 241.1 trillion won allocated to fast-tracked projects, 139 trillion won (57.7%) was already disbursed by May, signaling a continued focus on economic stimulus.

Rising Fiscal Risk Amid Political and Economic Uncertainty

This record-high debt also coincides with heightened political tension, following the second arrest of former President Yoon Suk Yeol, and growing global concerns over public debt burdens. With the global interest rate cycle potentially reversing, South Korea may face higher borrowing costs, further pressuring fiscal sustainability.

The situation underscores the mounting risk that government spending, if left unchecked, could deepen the budget deficit and crowd out investment in long-term development.

A Delicate Balancing Act

With the debt already nearing its full-year forecast just five months into 2025, the government is walking a fine line. If revenue continues to slow and borrowing remains high, the risk of fiscal imbalance will grow, threatening economic stability.

In the second half of the year, policymakers must weigh their choices carefully whether to continue stimulating growth at the cost of ballooning debt or begin tightening fiscal policy amid uncertain global conditions. Either path will shape South Korea’s economic resilience in the years ahead.