Japanese Ruling Party Lawmaker Proposes Using BOJ ETF Holdings to Cover Tax Cut Shortfall
nashnova research
Senior LDP tax-panel member Daishiro Yamagiwa suggested selling the BOJ's ¥37 trillion ETF portfolio faster to help plug the ¥5 trillion-a-year gap from slashing the food consumption tax — the first time the central bank's balance sheet has entered ruling-party fiscal debate.
Where does the money come from, and what hole needs filling?
PM Sanae Takaichi's flagship policy is now approved: the food consumption tax drops from 8% to 1% for two years.
This means → roughly ¥5 trillion (≈$31.7 billion) a year in tax revenue vanishes, and a replacement funding source is needed.
Takaichi has pledged no new government bond issuance, so the money must come from non-borrowing channels.
Why target the BOJ's ETF stash?
Over roughly thirteen years of economic stimulus, the Bank of Japan bought ETFs — exchange-traded funds that track stock indices — building a position worth about ¥37 trillion.
In plain terms = the BOJ accumulated a mountain of equities as a legacy of its massive monetary easing.
Yamagiwa, a senior member of the LDP's tax-policy panel, argued that with stock prices near highs, speeding up sales and redirecting the proceeds could help cover the tax-cut gap.
How slow is the current sell-off?
Under a plan set last September, the BOJ is offloading ETFs at roughly ¥330 billion a year.
This means → at the current pace, liquidating the full portfolio would take about a century.
The BOJ chose this glacial speed for one reason: to avoid shocking the stock market — a sudden wave of selling would push prices down.
Where does this proposal stand right now?
Yamagiwa's idea remains at the discussion stage with no formal policy proposal yet.
This reflects a notable shift: ruling-party insiders are beginning to treat the BOJ's balance sheet as a fiscal tool they can tap — something never aired publicly before.
In plain terms = if the BOJ were actually asked to accelerate ETF sales significantly, sustained selling pressure on Japanese equities would become the key variable markets need to watch.
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