Japan government to issue ¥22 trillion in bonds to finance supplementary budget

The government has decided to issue about ¥22.1 trillion in new government bonds in the supplementary budget proposal for fiscal 2021, which was to be adopted on Friday or later.

This is in addition to the government’s previously planned total of ¥43.6 trillion in new bonds in fiscal 2021. The total amount to be issued for fiscal 2021 is now expected to surpass that of fiscal 2009, when ¥52 trillion in government bonds were issued as a result of the 2008 financial crisis.

It will be the second-largest issuance so far, after the ¥108.6 trillion in government bonds issued in fiscal 2020.

Fiscal spending in the general account of the supplementary budget proposal is expected to be around ¥36 trillion. Of the extra budget, ¥31.6 trillion is earmarked for the economic stimulus package adopted by the government on Nov. 19. Another ¥3.5 trillion will be spent for subsidies to local governments.

The government has revised upward its forecast for tax revenue in fiscal 2021 by about ¥6.4 trillion, from the ¥57.4 trillion estimated in its original budget, due to the recovery in corporate earnings. Tax revenue in fiscal 2021 will likely surpass the fiscal 2020 level of ¥60.8 trillion to reach a record high.

The increase in tax revenue will be used to finance the supplementary budget along with the about ¥6 trillion surplus from the fiscal 2020 budget.

These funds would not be enough to finance the supplementary budget, so the government decided to issue deficit-covering bonds and so-called “construction bonds,” which can only be used for certain purposes, such as public works projects.

The first economic stimulus package compiled by the Cabinet of Prime Minister Fumio Kishida contains ¥55.7 trillion in fiscal spending, including the government’s fiscal investment and loans, and spending by local governments. It is the largest economic stimulus package ever approved by a Japanese cabinet.

A reserve fund of ¥5 trillion will be set aside in the fiscal 2022 budget plan, which will be prepared in conjunction with the supplementary budget proposal, to prepare for a possible resurgence in coronavirus infections.