Japan to cap new govt debt issuance at 41.3 trln yen next FY - Nikkei

TOKYO, July 19 Fri Jul 18, 2014 10:08pm EDT

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TOKYO, July 19 (Reuters) - Japan's government will cap new bond issuance for next fiscal year's budget at 41.3 trillion yen ($407.62 billion), which is the same amount of new debt sold for the current fiscal year's budget, the Nikkei reported on Saturday.

The debt cap will help the government meet its fiscal discipline target, but it will have to cut spending as budget requests for next fiscal year are expected to rise to a record high above 100 trillion yen, the Nikkei reported without citing sources.

The cabinet will agree budget request guidelines on July 25 but is unlikely to set a limit on budget requests, the Nikkei said. This could worry some investors as Japan's debt burden is the largest in the world at more than twice the size of its $5 trillion economy.

For next fiscal year starting in April, the government is will set aside about 4 trillion yen for Prime Minister Shinzo Abe's growth strategy, which is known as the third arrow of his economic policy.

The government faces an important test because it needs to lower the primary budget deficit next fiscal year by 3 trillion yen to 15 trillion yen to meet an important fiscal discipline target.

A primary budget balance excludes debt servicing costs and income from bond sales. ($1 = 101.3200 yen) (Reporting by Stanley White; Editing by Robert Birsel)