Overview
- Prime Minister Sanae Takaichi said on Monday she will compile an extra budget of about 3 trillion yen to rebuild reserves and subsidize fuel and household utility bills.
- The government approved 513.5 billion yen at a Cabinet meeting on Tuesday to cover electricity and gas bills from July through September as an interim step while the larger package is prepared.
- Tokyo says the extra spending will be financed with deficit-financing bonds but insists overall planned bond issuance will not rise because of stronger tax, non-tax revenue and expected underspending.
- Markets reacted to reports of fresh borrowing with the 10-year Japanese government bond yield jumping to about 2.8%, its highest level since 1996, and analysts warn the move could raise debt-servicing costs and fiscal strain.
- Japan already has a very high debt-to-GDP ratio, rising interest payments in the 2026 budget, and any further revenue cuts such as a proposed consumption-tax break on food could add up to trillions of yen to fiscal pressures and complicate Bank of Japan policy.