Takaichi told parliament on Friday that proceeds from the central bank's ETF sales could be directed towards areas considered important for national economic security. The proposal forms part of the government's effort to mobilise non-tax revenue to finance its spending agenda while managing concerns over public debt and financial-market stability.
The Bank of Japan decided on 30 October to increase the annual pace of its ETF sales to 860 billion yen, equivalent to approximately $5.5 billion, from 330 billion yen previously. A portion of the central bank's annual net profits, including income associated with asset sales, is transferred to government coffers.
The government intends to use additional proceeds to support spending in areas such as crisis management and strategic growth industries. Takaichi said the revenue generated from the sales represented the benefits of economic growth and could appropriately be reinvested in priority areas.
The proposal comes as the administration faces pressure to finance ambitious spending commitments without triggering a significant increase in government bond issuance. Additional borrowing could raise concerns among investors about Japan's fiscal position, particularly if bond yields rise or confidence in the government's debt-management strategy weakens.
Financial-market volatility has added to those pressures. Japanese shares fell sharply on Friday as a broader technology sell-off affected markets across Asia. The decline in AI-related and semiconductor stocks has raised concerns about the potential effect of weaker equity prices on tax revenue and the wider economy.
A government official told Reuters that sustained market weakness could reduce tax receipts below initial expectations. That would complicate the administration's efforts to expand spending while maintaining fiscal flexibility.
The proposal also raises questions about the relationship between monetary and fiscal policy. The Bank of Japan has said it will dispose of its ETF holdings in a manner designed to minimise market disruption and independently of fiscal or political considerations. Its asset sales are therefore a central-bank portfolio decision, while the government's use of resulting revenue belongs to the fiscal process.
The distinction matters as the central bank continues to assess inflation risks and the possibility of further interest-rate increases. A prolonged market downturn could complicate its policy communication, although it does not automatically require a change in its monetary-policy direction.
Japan's ability to fund new priorities through asset-related revenue will depend on the pace of disposals, market conditions and the proceeds ultimately transferred to the state. Investors will also monitor whether the spending plans support productivity and economic resilience without creating additional pressure on public finances.
