Japan's government will draft a package that will exceed the size of last year’s stimulus.
Japanese PM Shigeru Ishiba has stressed that his focus is to get the economy to fully shake off the growth-sapping deflation.
On Oct 15, Mr Ishiba said in an election campaign speech the government would aim for a spending package funded by a supplementary budget that exceeds last year’s 13 trillion yen . While expectations that the BOJ will go slow with raising borrowing costs has kept the yields on 10-year Japanese government bonds below 1 per cent, the prospect of more debt issuance may start to hurt bond market sentiment, analysts say.
Analysts at SMBC Nikko Securities predict the government will need to issue over 10 trillion yen in new debt to fund a supplementary budget sized more than 13 trillion yen this year. That changed in 2020, when the size ballooned to 73 trillion yen to combat the Covid-19 pandemic. Since then, Japan has continued to compile outsized, largely debt-funded, supplementary budgets. Last year, nearly 9 trillion yen of the 13 trillion yen spending was funded by new debt.
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