BOJ ETF Holdings in Crosshairs as Japan Seeks Tax Cut Funding

The Bank of Japan's vast holdings of exchange-traded funds (ETF) may be tapped to fund the planned sales tax cut in Japan. According to a ruling party executive, selling some of these ETFs could help fill the estimated revenue shortfall of 5 trillion yen ($31.71 billion) annually.

Daishiro Yamagiwa, a senior lawmaker of the Liberal Democratic Party's (LDP) tax panel, suggested that the BOJ's current plan to sell its 37-trillion-yen ETF holdings at an annual pace of around 330 billion yen could be accelerated. This move would be aimed at supporting Prime Minister Sanae Takaichi's flagship plan to slash the sales tax on food items to 1% from 8% for two years.

The BOJ has been slowly selling its ETF holdings since September last year as part of its efforts to dismantle remnants of its massive stimulus. However, Yamagiwa noted that the current pace is too slow and suggested speeding up the sales process to avoid disrupting the stock market.