Japan faces fiscal strain with new $19 billion budget plan

Japan’s government will compile an extra budget of around 3 trillion yen ($19 billion), Prime Minister Sanae Takaichi said on Monday, raising concerns over fiscal expansion that could further strain the country’s already stretched public finances, News.Az reports, citing Reuters. 

The additional budget comes after the government decided to use roughly half of its 1 trillion yen contingency reserves to fund subsidies aimed at curbing utility bills. This has increased the need to replenish reserves amid the risk of a prolonged Middle East crisis.

Japan has also been extending separate subsidies to stabilise gasoline prices, a costly measure that is rapidly depleting its contingency reserves as oil prices remain elevated.

Takaichi said the extra budget will be financed through new deficit-financing bonds, but stressed that the measure could be implemented without disrupting the bond market.

She added that the planned issuance of government bonds would remain unchanged from the original plan, as stronger tax revenues, non-tax income, and expected underspending are likely to eliminate the need for around 3 trillion yen in deficit bonds that had been scheduled for issuance through June.

The plan, first reported earlier this month, marks a reversal from her earlier remarks in which she ruled out the need for an additional budget.

A Reuters report suggesting that the government would issue fresh debt to fund the extra budget helped push the yield on the benchmark 10-year Japanese government bond (JGB) to 2.8% last week, its highest level since October 1996.

News.Az 

By Nijat Babayev