Japan issues bonds to raise funds for social subsidies, as markets question the promise of "increasing expenditure without increasing debt"

(1) Japanese Prime Minister Sanae Takaichi is preparing a supplementary budget of approximately 3 trillion yen (roughly $19 billion) to help households cope with rising energy prices, a weakening yen, and other living cost pressures. This reverses her previous stance that no additional spending was necessary, but she stated that the total amount of bonds issued for the 2026 calendar year will remain the same as the original budget plan. (2) The supplementary spending will be financed by issuing deficit-covering bonds. After the announcement, the yield on 10-year Japanese government bonds rose to 2.809% on May 20, reaching a new high since 1996; the 30-year yield surpassed 4%, reflecting growing market concerns over fiscal risks and inflationary pressures. Experts pointed out that Japan has never formulated policies based on the calendar year in its history, calling this move a "warning signal." (3) Some analysts believe this budget is more of a "targeted buffer" against energy price pressures rather than large-scale demand stimulus, aligning with Takaichi's philosophy. Recent Japanese economic data remains positive (Q1 GDP annualized growth of 2.1%, April exports up 14.8%), but the yen is still hovering around 160 against the US dollar, and the bond market reflects that inflation, interest rate hike expectations, and an increase in bond supply are becoming "increasingly certain."