BOJ ETF Holdings in Spotlight as Japan Taps for Tax Cut Funding

The Bank of Japan's (BOJ) holdings of exchange-traded funds (ETFs) may be tapped to fund Prime Minister Sanae Takaichi's plan to slash the sales tax on food items to 1% from 8%. The government has signed off on this plan despite concerns over the nation's strained finances.

The revenue shortfall is estimated at around 5 trillion yen (USD31.71 billion) annually, and the BOJ's holdings could potentially help fill this gap. Daishiro Yamagiwa, a senior lawmaker of the Liberal Democratic Party's (LDP) tax panel, suggested that proceeds from selling the BOJ's 37-trillion-yen ETF holdings could be considered as an idea to fund the revenue shortfall.

Under the current plan, the central bank sells its ETF holdings in the market at an annual pace of around 330 billion yen. However, Yamagiwa stated that 'under the BOJ's current plan, it would take a century to sell all of its ETF holdings. Stock prices are so high now that it won’t hurt to think about speeding up the pace of sales.'