BOJ's ETF Holdings in Crosshairs as Japan Seeks Sales Tax Cut Funding

The Japanese government is considering using the Bank of Japan's ETF holdings to fund its planned sales tax cut. The ruling Liberal Democratic Party (LDP) has been looking for ways to fill a revenue shortfall estimated at around 5 trillion yen ($31.71 billion) annually, without relying on fresh debt issuance.

Daishiro Yamagiwa, a senior lawmaker of the LDP's tax panel, suggested that selling some of the BOJ's ETF holdings could be an option. The central bank has been slowly unloading its 37-trillion-yen worth of ETFs left over from 13 years of purchases aimed at reflating a moribund economy.

Yamagiwa noted that under the BOJ's current plan, it would take 'a century to sell all of its ETF holdings'. However, with stock prices high now, there is no need to worry about disrupting the market by speeding up the pace of sales.