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Japan’s government will prepare an additional budget worth around 3 trillion yen ($19 billion), Prime Minister Sanae Takaichi announced on Monday, raising concerns about further fiscal expansion and growing pressure on the country’s public finances.
The move comes after Tokyo decided to use nearly half of its 1 trillion yen emergency reserve fund to finance subsidies aimed at lowering household utility costs. The government is also continuing fuel subsidies designed to stabilize gasoline prices as global oil prices remain high due to tensions in the Middle East.
The rising cost of these support measures has increased the need for Japan to rebuild its contingency reserves, prompting the decision to introduce a fresh supplementary budget. According to Takaichi, the package will be funded through new deficit-financing bonds. However, she stressed that the government does not expect the plan to disrupt the Japanese bond market.
Takaichi explained that Japan’s planned government bond issuance schedule will remain unchanged because stronger-than-expected tax revenues, non-tax income, and lower spending in other areas could offset the need for approximately 3 trillion yen in bonds originally scheduled for issuance through June.
The announcement marks a notable policy shift after Takaichi previously dismissed the possibility of an extra budget. Market concerns intensified earlier this month following reports that the government was considering additional debt issuance to support the spending package.
Those concerns contributed to a sharp rise in Japanese government bond yields. The benchmark 10-year Japanese government bond yield climbed to 2.8% last week, reaching its highest level since October 1996, according to Reuters.
Economists warn that continued fiscal stimulus and rising borrowing costs could place additional strain on Japan’s already heavy debt burden, while investors closely monitor the government’s next steps on economic support and bond issuance in 2026.
