Key insights
- Japan plans to issue fresh debt to fund an extra budget aimed at mitigating the economic impact of the Middle East war and rising energy costs. This action could further strain Japan's finances and potentially accelerate the rise in long-term interest rates. While primarily impacting Japan, rising global energy prices could contribute to inflationary pressures worldwide, indirectly affecting US markets.
TOKYO, May 18 (Reuters) - Japan’s government will likely issue fresh debt as part of funding for a planned extra budget to cushion the economic blow from the Middle East war, a government source with direct knowledge of the deliberation told Reuters on Monday.
Any additional debt issuance would further strain Japan’s already worsening finances and may accelerate rises in long-term interest rates.
The yield on the benchmark 10-year Japanese government bond (JGB) rose 10 basis points to 2.8% on Monday, marking the highest level since October 1996.
Japan’s government is looking at compiling a supplementary budget to ease household energy costs, as fuel prices rise due to the oil shock triggered by the Iran war, sources told Reuters last week.