BOJ's ETF Holdings May Fund Japan's Planned Sales Tax Cut

The Bank of Japan's (BOJ) massive holdings of exchange-traded funds (ETFs) may be tapped 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 government has approved Prime Minister Sanae Takaichi's plan to cut the sales tax on food items from 8% to 1% for two years, despite concerns over Japan's strained finances.

Yamagiwa noted that selling the ETFs at a faster pace would not disrupt the stock market, as the current low annual sales of around 330 billion yen are unlikely to cause significant volatility.