BoJ’s ETF holdings may help fund tax cut, LDP executive says

TOKYO: Tapping the Bank of Japan’s holdings of exchange-traded funds (ETF) may be an option to fund a planned sales tax cut, a ruling party executive said in a recent online programme, a sign its vast asset holdings could come under the political spotlight.

The government on Wednesday signed off on Prime Minister Sanae Takaichi’s flagship plan to slash the sales tax on food items to 1percent from 8percent for two years, pressing ahead despite mounting concerns over the nation’s already strained finances.

Takaichi has pledged not to rely on fresh debt issuance and instead look for non-tax revenues to fund the revenue shortfall, estimated around 5 trillion yen (USD31.71 billion) annually.

Daishiro Yamagiwa, a senior lawmaker of the ruling Liberal Democratic Party’s (LDP) tax panel, said proceeds from selling the BOJ’s 37-trillion-yen ETF holdings could be considered as an idea to fill the shortfall.

“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,” Yamagiwa, a senior lawmaker of the Liberal Democratic Party’s (LDP) tax panel, told an online programme aired on Tuesday.

Under a plan set in September last year, the central bank is currently selling its ETF holdings in the market at an annual pace of around 330 billion yen as part of its efforts to dismantle remnants of its massive stimulus.

The BOJ has said it opted to move slowly to avoid disrupting the stock market in unloading the 37-trillon-yen worth of ETFs left on its balance sheet during 13 years of purchases aimed at reflating a moribund economy.