Japan to issue extra new bonds for stimulus, straining debt

JAPAN is set to issue additional new bonds worth US$154.8 billion in the current fiscal year to fund its economic stimulus package unveiled last week, three government sources with direct knowledge of the matter told Reuters on Friday (Nov 4).

The extra debt worth 22.9 trillion yen will bring the overall Japanese government bonds (JGBs) to 62.5 trillion yen (S$604.3 billion) for this fiscal year, adding to the industrial world’s heaviest debt burden. Outstanding long-term debt is now more than twice the size of Japan’s economy.

The heavy spending underscored the struggle of the government to strike a delicate balance between the conflicting needs to revive the fragile economy near-term and restore its tattered public finances.

Fiscal spending under the stimulus package will total 39 trillion yen, backed by an extra budget of 29 trillion yen. Some critics say the size of the stimulus package is too large while it fails to show a concrete way of appropriate spending.

“How long must we continue to do this,” Kengo Sakurada, head of Japan Association of Corporate Execuvies, a business lobby, told reporters. “The government has not delivered a message that the longer it continues the harder it seeks to exit” from stimulus measures, he said.

The government expects the stimulus spending to boost Japan’s gross domestic product (GDP) by 4.6 per cent.

The details of the extra budget followed Japan’s announcement last week that it would spend US$200 billion on an economic stimulus package meant to tame inflation and ease the pain of the economic blow from surging global commodity costs. REUTERS