What changed and how fast
The Bank of Japan said Friday it will accelerate sales of its exchange traded funds, raising annual disposals to ¥860 billion on a book value basis starting in January, compared with ¥330 billion now. At that rate, the estimated time to complete the sales would be about 43 years, down from 112.
Why that could swell government cash flow
By law, once dividends and other costs are covered, the BOJ hands its surplus earnings to the government. Bloomberg Economics' Taro Kimura estimates the faster plan would generate about ¥800 billion in extra annual revenue for the BOJ.
Where the money might flow
Japan's non tax revenue has topped ¥10 trillion in recent years on a fiscal year basis, so a larger BOJ payment would be noticeable. The potential windfall could help Prime Minister Sanae Takaichi line up funding for next year's budget, which includes pledges for a two year sales tax cut on food, a 14 year program to invest in growth, as well as expanded defense spending. It could also contribute to a planned special account for economic security. As Kazumasa Ishii of UBS SuMi TRUST Wealth Management put it, "BOJ payments to the government would be better suited to funding multi-year initiatives, such as a special account for economic security, rather than plugging a large, temporary revenue shortfall caused by measures such as a consumption tax cut."
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The investor angle
Faster ETF offloading could increase non tax revenue.
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