NEW DELHI: Japanese Prime Minister Sanae Takaichi has announced plans to channel additional proceeds generated from the Bank of Japan's (BOJ) sale of exchange-traded funds (ETFs) into strategic investments aimed at strengthening the country's economy and economic security. The move is part of the government's broader efforts to mobilise additional financial resources for priority sectors while limiting dependence on new government borrowing.

Addressing parliament on November 6, Takaichi said the additional revenue generated through the sale of the central bank's ETF holdings represented the benefits of Japan's economic growth and should be reinvested in areas critical to the country's future development. She indicated that the funds would be directed towards crisis management, economic security and industries where Japan has established competitive advantages.

The announcement follows the Bank of Japan's October 30 decision to accelerate the disposal of its substantial ETF holdings. The central bank raised its annual ETF sales target from 330 billion yen to 860 billion yen (approximately $5.5 billion), with the revised pace scheduled to take effect from January 2027. The decision reflects the BOJ's assessment that its existing pace of asset sales has had limited disruption to financial markets.

The Bank of Japan began selling its ETF holdings in January 2026 as part of its gradual withdrawal from the large-scale monetary stimulus programme introduced to support economic growth and achieve its inflation target. The central bank has adopted a gradual approach to avoid destabilising stock markets, estimating that the accelerated sales programme would still take approximately 43 years to dispose of its entire portfolio.

A portion of the central bank's annual net profits, including earnings generated from ETF sales, is transferred to the government's accounts. The Takaichi administration is seeking to increase such non-tax revenue to finance its ambitious spending commitments without placing additional pressure on public debt. Japan has one of the highest public debt levels among advanced economies, making alternative sources of government revenue an important consideration for policymakers.

The government is also exploring ways to strengthen investment in strategically important industries, including advanced technology, semiconductors, artificial intelligence, critical infrastructure and other sectors linked to national and economic security. Takaichi said Japan would focus on developing industries in which the country possesses technological and industrial advantages to build a stronger and more resilient economy.

The announcement comes amid heightened volatility in global financial markets, particularly following the recent decline in technology and semiconductor stocks. Japanese equity markets have faced pressure from concerns over artificial intelligence valuations and uncertainty surrounding global investment trends. Takaichi said her government was closely monitoring market developments and would take steps to reinforce the country's economic foundations.

The accelerated ETF sales are also significant for the Bank of Japan's broader monetary policy strategy. By gradually reducing its holdings of exchange-traded funds, the central bank is continuing to unwind an extraordinary phase of monetary easing that involved large-scale purchases of financial assets to support economic activity and inflation.

However, the government's plan to use additional proceeds for strategic expenditure raises questions about the balance between fiscal priorities and the operational independence of the central bank. The BOJ's asset-sale decisions are taken independently, while the government determines how additional revenue transferred to public accounts is allocated through its budgetary process.

The move highlights Japan's attempt to balance economic expansion, fiscal discipline and national security priorities at a time of global economic uncertainty. By redirecting revenue from central bank asset disposals towards strategic sectors, the Takaichi government aims to strengthen domestic industries, improve economic resilience and reduce reliance on additional government borrowing.