By Tamiyuki Kihara and Leika Kihara<\/p>\n
TOKYO, May 18 (Reuters) – Japan’s government will likely issue fresh debt as part of funding for a planned extra budget to cushion the economic blow from \u200cthe Middle East war, a government source with direct knowledge of the deliberation told Reuters on \u200cMonday.<\/p>\n
Any additional debt issuance would further strain Japan’s already worsening finances and may accelerate rises in long-term interest rates.<\/p>\n
Concerns over worsening \u200bgovernment finances pushed the benchmark 10-year Japanese government bond (JGB) yield to 2.8% on Monday, the highest since October 1996, and the 30-year yield to a record top.<\/p>\n
Prime Minister Sanae Takaichi is planning to instruct the government to consider formulating a supplementary budget on Monday although the size of such a package was yet to be decided, the \u200csource said.<\/p>\n
Sources told Reuters last week the \u2060government was looking to compile a supplementary budget to ease household energy costs.<\/p>\n
In a proposal to the Ministry of Finance, opposition party leader Yuichiro Tamaki on Friday called \u2060for an extra budget of around 3 trillion yen ($18.9 billion) – which may serve a benchmark for future debate on the size of spending.<\/p>\n
The extra budget will focus on funding government subsidies to curb gasoline and utility bills, as \u200bsurging \u200boil prices caused by the Middle East conflict cloud the \u200boutlook for an economy heavily reliant on \u200cfuel imports from the region.<\/p>\n
“When countries like Japan and Britain contemplate fiscal stimulus, there’s a tendency for that to trigger a triple selling of shares, currencies, and bonds because their economic growth is weak and inflationary risks are high,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking.<\/p>\n
The bond selloff would also complicate the BOJ’s decision on whether to raise its short-term policy rate to 1% from 0.75% at its next meeting \u200cin June.<\/p>\n
At the June meeting, the BOJ will also conduct \u200ba review of its existing bond taper plan and announce \u200ba new plan for fiscal 2027 onward.<\/p>\n
The war-induced \u200bspike in energy prices, coupled with rising import costs from the weak yen, pushed \u200cJapan’s wholesale inflation to a 3-year high of \u200b4.9% in April, bolstering \u200bthe case for the central bank to raise rates as soon as next month.<\/p>\n
“If inflationary risks heighten, there’s a chance the BOJ could raise short-term rates to 1.5% by the March end of \u200bthe current fiscal year,” said Mari \u200cIwashita, executive rates strategist at Nomura Securities, adding that the 10-year yield could head towards \u200b3%.<\/p>\n","protected":false},"excerpt":{"rendered":"By Tamiyuki Kihara and Leika Kihara TOKYO, May 18 (Reuters) – Japan’s government will likely issue fresh debt…\n","protected":false},"author":2,"featured_media":454429,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[72,107972,113,15044,61,60,582,197226],"class_list":["post-454428","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-debt-issuance","tag-economy","tag-government-finances","tag-ie","tag-ireland","tag-japan","tag-supplementary-budget"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/454428","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=454428"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/454428\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/454429"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=454428"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=454428"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=454428"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}