Bank of Japan's ETF Holdings May Help Fund Sales Tax Cut, LDP Executive Suggests

A senior executive of Japan's ruling Liberal Democratic Party (LDP) has suggested that proceeds from selling the Bank of Japan's (BOJ) exchange-traded fund (ETF) holdings could be used to fund a planned sales tax cut. The government recently approved Prime Minister Sanae Takaichi's plan to reduce the sales tax on food items to 1% from 8% for two years, with an estimated annual revenue shortfall of around 5 trillion yen. The BOJ is currently selling its 37-trillion-yen ETF holdings at an annual pace of approximately 330 billion yen as part of its stimulus unwinding, a process the central bank has indicated would be slow to avoid market disruption.