Japan to Issue $192 Billion in Debt for Stimulus: Nikkei

(Bloomberg) -- Japan plans to issue 22.1 trillion yen ($192 billion) in bonds to help pay for its fourth extra budget of the pandemic era, as new Prime Minister Fumio Kishida looks to shore up the recovery before next year’s elections, the Nikkei newspaper reported Wednesday.

Some 6 trillion yen carried over from previous stimulus and another roughly 6 trillion yen in extra tax revenue wasn’t enough to cover the extra budget’s 36 trillion yen in general expenditures, the Nikkei reported, without saying where it got the information.

With the borrowing plan, Kishida is signaling his willingness to take on more debt as he lays the groundwork for what he says will be a new kind of capitalism. 

Some analysts have questioned the need for so much spending now, given that the worst of the pandemic appears over and the economy was forecast to rebound on its own.

Kishida, who had been know for being fiscally cautious, surprised investors on Friday by unveiling a record fiscal package of 56 trillion yen, following a report earlier in the week that the economy shrank last quarter for the fifth time in eight quarters. Reviving the recovery takes precedence over debt concerns now, Kishida said.  

Still, with vaccination rates now over 75% and restrictions on economic activity largely lifted, the economy already looked poised to pick up.

At the same time, the government failed to spend more than 30 trillion yen it budgeted for stimulus last year, opening questions about how much of the new money it will manage to inject into the economy.

The new borrowing will also add to the developed world’s heaviest government debt burden. With the latest stimulus yet to be factored in, the International Monetary Fund calculates that Japan’s government debt will reach 257% the size of GDP in 2021, bigger than any of its Group of Seven peers.

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