Japan eyes keeping FY27 bond issuance around 40 trillion yen: PM

Japan's government intends to maintain new government bond issuance at approximately 40 trillion yen for the fiscal year 2027 budget, Prime Minister Sanae Takaichi revealed in an interview with the Yomiuri newspaper. This target comes as budget requests from ministries and agencies are projected to reach a record high for the fourth consecutive year, potentially exceeding 130 trillion yen.

Takaichi indicated that the government would follow the same approach used for the fiscal 2025 budget, where increased tax revenues helped offset extraordinary spending, allowing new bond issuance to remain around 40 trillion yen. The government plans to include spending in the initial budget that has often been financed through supplementary budgets in recent years, which could inflate the headline expenditure figure.

While the 40 trillion yen target for fiscal 2027 matches the fiscal 2025 issuance, it represents a significant increase compared to the 32.7 trillion yen planned for the current fiscal 2026 budget. Economists note that this target might be viewed as somewhat expansionary.

Furthermore, Takaichi mentioned the possibility of tapping into Japan's substantial foreign exchange reserves, estimated at $1.3 trillion, to finance a planned reduction in the consumption tax on food. This tax cut, a key policy initiative aimed at easing the burden of rising living costs on households, is expected to create an annual revenue shortfall of roughly 5 trillion yen, intensifying scrutiny on how the government plans to cover this deficit.

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We will continue with the same approach going forward.