BOJ ETF Holdings May Fund Japan Sales Tax Cut

The Bank of Japan's vast holdings of exchange-traded funds (ETFs) may be used to fund a planned sales tax cut in Japan, according to a ruling party executive.

Daishiro Yamagiwa, a senior lawmaker with the Liberal Democratic Party's (LDP) tax panel, suggested that selling part of the BOJ's 37-trillion-yen ETF holdings could help fill the revenue shortfall estimated at around 5 trillion yen ($31.71 billion) annually.

The LDP has pledged not to rely on fresh debt issuance and instead look for non-tax revenues to fund the sales tax cut, which would lower the sales tax on food items to 1% from 8% for two years.

Yamagiwa noted that under the BOJ's current plan, it would take a century to sell all of its ETF holdings and suggested speeding up the pace of sales due to high stock prices.