Japan aims to cap 2027 bond issuance at 40 trillion yen

Japanese Prime Minister Sanae Takaichi has announced a plan to cap new government bond issuance at approximately 40 trillion yen (about $251 billion) for the 2027 fiscal year. This target represents a significant increase from the 32.7 trillion yen planned for the 2026 fiscal year.

Despite the cap, budget requests from ministries and public institutions are expected to exceed 130 trillion yen, marking the fourth consecutive year of record-breaking budget demands. Takaichi intends to use increased tax revenues to offset a portion of the additional spending, similar to the approach taken in the 2025 fiscal year.

To address rising living costs, the government is also considering a reduction in consumption tax on food products. This move could result in an annual revenue loss of roughly 5 trillion yen, which officials may seek to cover using the country’s $1.3 trillion in foreign exchange reserves. Toru Suehiro, Chief Economist at Daiwa Securities, noted that if the borrowing levels align with the 40.3 trillion yen mark, the policy could be characterized as expansionary.