Investing.com --The Bank of Japan's decision to accelerate sales of its exchange-traded fund holdings could generate additional government revenue, potentially helping Prime Minister Sanae Takaichi finance her ambitious spending plans.
The central bank announced Friday that it would increase annual ETF sales to ¥860 billion ($5.5 billion) on a book-value basis starting in January, compared with the current ¥330 billion.
The faster pace would reduce the estimated time required to unwind its ETF holdings to approximately 43 years from 112 years.
Under Japanese law, the BOJ must transfer surplus earnings to the government after accounting for dividends and other expenses.
Accelerating ETF sales could increase realized capital gains and boost these payments, providing additional non-tax revenue for the government.
Finance Minister Satsuki Katayama said Friday that higher ETF sales should increase the central bank's surplus earnings and government remittances.
She added that officials would assess how to allocate the additional funds during the upcoming budget process.
Taro Kimura, a senior economist at Bloomberg Economics, estimated that the accelerated sales could generate approximately ¥800 billion in additional annual revenue for the BOJ.
The potential revenue increase comes as Takaichi prepares to finance several major policy commitments, including a two-year reduction in food consumption taxes, a 14-year investment programme and increased defense spending.
Japan's government is also considering establishing a dedicated economic security account to support longer-term strategic investments.
Kazumasa Ishii, a strategist at UBS SuMi TRUST Wealth Management, said additional BOJ payments would be better suited to financing multi-year programmes than offsetting temporary revenue losses from tax reductions.
The accelerated ETF disposal programme could provide another source of government funding as Japan balances fiscal expansion with the central bank's gradual withdrawal from unconventional monetary policies.
Original Article
BOJ speeds up ETF sales, potentially boosting funding for Takaichi's plans
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