Japan to Issue $75 Billion in New Bonds for Economic Support

Post by : Raina Nasser

The Japanese government, under the leadership of Prime Minister Sanae Takaichi, is gearing up to unveil a significant supplementary budget that leans heavily on the issuance of new bonds, rekindling concerns regarding the nation's long-term fiscal stability. This additional budget is estimated to reach approximately ¥18.3 trillion (USD 117 billion), as outlined in documents reviewed by Bloomberg.

Of this total, ¥11.7 trillion will be sourced from new government bonds—markedly higher than the ¥6.7 trillion added under former Prime Minister Shigeru Ishiba’s economic initiatives a year prior. The cabinet is scheduled to formally approve the supplementary budget on Friday.

In an effort to alleviate borrowing strains, the government additionally intends to allocate ¥2.9 trillion from tax revenue surpluses, around ¥1 trillion from non-tax revenues, and about ¥2.7 trillion in leftover funds from the previous fiscal year.

The newly announced economic package represents the largest injection of spending since Japan emerged from pandemic restrictions, showcasing Takaichi’s commitment to stimulate the economy while households and businesses grapple with inflation and stagnating wage growth.

However, the increase in borrowing has sparked renewed apprehension among investors, who are closely monitoring the rise in Japan's bond yields alongside its escalating debt levels. Long-term government bond yields have recently reached heights not seen in over two decades, adding pressure to the yen.

To mitigate market concerns, Prime Minister Takaichi has highlighted that Japan's total bond issuance for the current fiscal year is projected to be less than the previous year’s total. In fiscal 2024, Japan issued ¥42.1 trillion in bonds across various budgets. With the inclusion of the new ¥11.7 trillion, the total for this year will amount to ¥40.3 trillion, approximately 4.3% lower than last year.

Market analysts will now keenly observe how the government reconciles its economic support initiatives with its fiscal discipline commitments, particularly given Japan’s public debt is among the highest in developed countries.