UPDATE 1-Japan plans $19 billion extra budget amid concerns over fiscal strains

Takaichi ​said the extra ⁠budget will be financed by new deficit-financing bonds, but added the measure could be implemented without affecting ⁠the bond market. The calendar-based issuance of government bonds will remain unchanged from the original plan, ​as stronger tax revenues, non-tax income and expected underspending are likely to eliminate the ⁠need for around 3 trillion yen in deficit bonds that had been scheduled for issuance through ⁠June, ​she said.

​Japan's government will compile an extra ‌budget ​of some 3 trillion yen ($19 billion), Prime Minister Sanae Takaichi said on Monday, stoking concerns over fiscal expansion that ‌could further strain the country's already-stretched finances. The extra budget comes as the government decided to use roughly half of its 1 trillion yen contingency reserves to fund subsidies aimed ‌at curbing utility bills, increasing the need to replenish reserves amid the ‌risk of a prolonged Middle East crisis.

Japan has also been extending separate subsidies to keep gasoline prices steady, a costly step that is quickly using up its contingency reserves as oil prices remain ⁠elevated. Takaichi ​said the extra ⁠budget will be financed by new deficit-financing bonds, but added the measure could be implemented without affecting ⁠the bond market.

The calendar-based issuance of government bonds will remain unchanged from the original plan, ​as stronger tax revenues, non-tax income and expected underspending are likely to eliminate the ⁠need for around 3 trillion yen in deficit bonds that had been scheduled for issuance through ⁠June, ​she said. The plan, first reported earlier this month, marks a reversal from her previous remarks ruling out the need for an additional budget.

A subsequent Reuters ⁠report that the government is likely to issue fresh debt as part of funding ⁠for the ⁠extra budget helped drive the yield on the benchmark 10-year Japanese government bond (JGB) to 2.8% last week, its highest since October ‌1996. ($1 = 158.9300 ‌yen)