Exclusive: Japan to boost government bond issuance by $149 billion to fund stimulus - sources

TOKYO (Reuters) - Japan will boost government bond issuance by $149 billion from July to fund a massive stimulus package aimed at combating the hit to the economy from the coronavirus pandemic, two government sources told Reuters on Monday.

The additional 16 trillion yen ($149 billion) in bonds comes on top of the government’s existing plan to sell nearly 129 trillion yen of Japanese government bonds (JGBs) in the fiscal year beginning in April.

The increase would roughly match the nearly 17 trillion yen in additional bonds Japan sold in 2009 to fund stimulus measures during the global financial crisis.

The total amount to be sold in markets in the upcoming fiscal year, at around 145 trillion yen, would be the first increase in annual bond issuance in four years.

Prime Minister Shinzo Abe has pledged to lay out a huge stimulus plan to combat the virus fallout that will exceed the 57-trillion-yen package compiled after the collapse of Lehman Brothers in 2008.

The government will unveil a supplementary budget for the next fiscal year to fund part of the package, which will include plans to issue more bonds, the sources said on condition of anonymity as they are not authorized to speak publicly.

The government will increase issuance for JGBs of all maturities excluding 40-year bonds, inflation-linked bonds and liquidity-supplying bonds, the sources said. It may also issue six-month treasury discount bills, they said.

The finance ministry, which oversees bond issuance, will hold a meeting with 21 commercial banks and securities firms in coming days to iron out details, and announce the plan on April 7, the sources said.

The rapid spread of the coronavirus pandemic has added to woes for Japan’s economy, which is on the brink of recession as the outbreak disrupts supply chains, cools consumption and has postponed the Tokyo Olympic Games.

Abe said on Saturday the government will compile the stimulus package in about 10 days, which includes cash payouts to households and a scheme for private financial institutions to lend to cash-strapped small firms at zero interest.

While the package will help ease economic pain, it will add to Japan’s ballooning public debt which, at twice the size of its economy, is the biggest among major economies.

($1 = 107.7400 yen)

Reporting by Takaya Yamaguchi, writing by Leika Kihara; Editing by Sam Holmes