The Bank of Japan is on track for zero purchases of real estate investment trusts (J-REIT) this year and its smallest annual haul of exchange-traded funds (ETFs) since 2010 as it continues to stealthily tiptoe in the direction of more conventional policy.

The central bank has yet to step into the J-REIT market this year as of Tuesday, after purchases every year since 2010 to help lower risks in the property market. Separately, the BOJ has bought ETFs, another risk asset, just three times so far this year as the stock market soared to a 33-year high.

The lack of buying in the two markets reflects their robust growth, a factor that largely sidelines the need for additional help from the central bank. But it also points to the BOJ taking the opportunity to limit its distortion of markets and step back from its massive stimulus program.

"The BOJ doesn’t want to buy any more,” said Hiromi Yamaoka, former head of the BOJ’s financial markets department. "It’s trying to get financial markets used to the absence of its risk asset purchases.”

The lack of buying comes amid simmering speculation that the BOJ will scrap its negative interest rate and control of government bond yields in the first half of next year as it normalizes policy after decades of experimentation aimed at generating inflation.

The BOJ began buying the two risk assets on a small scale in December 2010 under former Gov. Masaaki Shirakawa. The purchases were ramped up aggressively by his successor, Haruhiko Kuroda, who eventually put in place annual caps on buying at ¥180 billion ($1.2 billion) for J-REITS and a whopping ¥12 trillion for ETFs.

The BOJ first started paring back its purchases of both before an official announcement that it would switch to more flexible buying of ETFs and J-REITs in 2021. Now the purchases have almost dried up entirely.

In another move that may also be a step on the way toward a more conventional policy approach, current Gov. Kazuo Ueda set an upper limit "reference” point of 1% on 10-year bond yields last month, as the central bank further loosened its grip on the government debt market.

"In the BOJ’s case, a change of market operations often comes ahead of the announcement of actual change,” said Ayako Fujita, chief Japan economist at JPMorgan Securities. "Market players are well aware of these shifts ahead of the announcement.”

With its move on J-REITs, the central bank likely recalls the heavy criticism it faced when stock prices first hit a three-decade high as it became the biggest owner of Japanese shares in late 2020.

Japan’s land prices across the nation have climbed overall for two straight years.

In Tokyo’s core areas, the price tag for used apartments has topped ¥100 million, after gains of about 40% in the last five years, according to real estate research firm Tokyo Kantei. Even though property buyers prefer to avoid used apartments, prices in the capital are soaring out of reach for households whose average income is around ¥5.5 million.

"It’s natural for the BOJ to stop buying and I see little expectation that they will step into the market now,” said Hiroshi Torii, a J-REIT analyst at SMBC Nikko Securities. "Property prices have stayed elevated at quite a high level so there’s no need to boost them further.”

While the paring back of purchases has had little impact on the two markets, if the BOJ starts reducing its holdings in a clearer sign of policy normalization, the effect could be much larger.

Yamaoka, the former BOJ official, said reducing the balance sheet is the real problem for the bank’s asset purchase program. The BOJ is unlikely to solve that issue under Kazuo Ueda’s governorship because keeping inflation stable is a big enough challenge in itself. Ueda’s term runs to spring 2028.

The BOJ’s J-REIT holdings were valued at ¥735 billion at the end of March while its ETFs were worth ¥53.2 trillion, according to the BOJ’s financial report for fiscal 2022.

"Selling J-REITs and ETFs could trigger a big shock in financial markets,” Yamaoka said. "It’s going to be tough to exit in that way during Gov. Ueda’s tenure.”