Tokyo eyes additional borrowing to fund subsidies amid rising energy costs and Middle East conflict fallout.
Japan’s government is set to issue fresh debt to finance a supplementary budget aimed at mitigating economic strain from the Middle East conflict and surging oil prices. The move follows reports of rising bond yields, with 10-year yields hitting 2.80% and 30-year yields briefly reaching a record 4.20% earlier today.
The extra budget will focus on subsidies for gasoline and utility bills to support households, as Japan grapples with its heavy reliance on fuel imports. No details on the budget’s size have been disclosed, but the decision to tap debt markets risks undermining fiscal credibility under Prime Minister Sanae Takaichi’s administration.
Markets have already reacted to speculation, with bond yields spiking amid concerns over Japan’s debt trajectory. The budget is expected to be finalized by June or July, adding to political and economic pressures as geopolitical tensions persist.