Japan to spend $313 billion in extra budget, tax income overshoots - draft

[November 24, 2021]  By Takaya Yamaguchi

TOKYO (Reuters) - Japan is set to craft an extra budget for fiscal 2021 on Friday, featuring spending of $313 billion, a draft seen by Reuters showed, while keeping market issuance of interest-bearing bonds steady as it focuses efforts to ease the blow from the coronavirus pandemic.

Tax revenue would exceed initial estimates by 6.4 trillion yen to hit a record 63.8 trillion yen, in a sign the world's third largest economy has weathered the fallout from the COVID-19 pandemic better than earlier thought, the draft showed.

The extra budget plan has been prepared as Prime Minister Fumio Kishida's cabinet last week unveiled the 79 trillion yen ($686 billion) package featuring a record 55.7 trillion yen in spending.

Additional new bond issuance was seen reaching 22.1 trillion yen, bringing total new bond issuance for this fiscal year to 65.7 trillion yen.
 

The Ministry of Finance is set to keep market issuance of interest-bearing government bonds (JGB) unchanged as it reviews its issuance plan for this fiscal year following a new stimulus package, sources with direct knowledge of the matter told Reuters.

The ministry intends to avoid a drastic review of market issuance of JGBs by cutting fiscal investment and loan programme (FILP) agency bonds to offset any increase in market issuance of interest-bearing JGBs.

Of the record 221.4 trillion yen of market issuance, 138.2 trillion yen of interest-bearing bonds will be left unchanged for issuance for the fiscal year ending in March 2022.
 

 Japanese Prime Minister Fumio Kishida speaks during his press conference, after the parliament re-elected him as prime minister following an election victory last month by his ruling Liberal Democratic Party, in Kantei, Japan November 10, 2021. Stanislav Kogiku/ Pool via REUTERS

The interest-bearing JGBs are those of maturity of 2 years, 5 years, 10 years, 20 years, 30 years and 40 years, as well as inflation-linked bonds and those for enhanced liquidity, the sources said on condition of anonymity because they are not authorised to speak publicly.

The remainder are treasury bills, to be used to adjust any excess or deficiency, depending on the supplementary budget. Issuance of treasury bills may be cut as a result of review.

Three rounds of heavy government stimulus last year have pushed the outstanding balance of long-term debt to 1,212 trillion yen this fiscal year, or 219% of the size of Japan's $5 trillion economy, which is the worst among industrial economies.

For the current fiscal year, the government has compiled a record initial budget worth 106.6 trillion yen to help fight the pandemic, with new borrowing accounting for 43.6 trillion yen.

($1 = 115.0000 yen)

(Reporting by Takaya Yamaguchi; Writing by Tetsushi Kajimoto; Editing by Kim Coghill)

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