Japanese investors back extra multi-billion dollar bonds to save economy

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Many bond investors favor issuing an extra 1.5 trillion yen ($13.96 billion) in bonds a month as part of a second stimulus budget to try to limit the economic damage of the coronavirus pandemic, Japanese finance ministry officials said on Friday.

Prime Minister Shinzo Abe last week ordered a second stimulus budget to be compiled for May 27. It would include subsidies to help firms pay rent and keep jobs.

Some economists and policy-makers expect a new round of stimulus measures to total between 10 trillion and 14 trillion yen, while some lawmakers seek 100 trillion yen.

The officials, speaking on condition of anonymity, held discussions on Friday with investors from financial institutions to help decide on the level of additional Japanese government bond (JGB) issuance for the fiscal year ending next March.

Many investors favored increasing bonds with maturities ranging from 2-year, 5-year, 10-year to 20-year by as much as 1.5 trillion yen a month, the officials said, reflecting low borrowing costs under the Bank of Japan’s ultra-low rates.

The second extra budget follows a record $1.1 trillion stimulus package this month funded by a first extra budget worth 27.5 trillion yen, to finance payouts to citizens and small firms.

The government has already raised the market issuance of government bonds by 5.8 trillion yen to 152.8 trillion yen in the fiscal year to March 2021 when it compiled the first extra budget.

Extra borrowing to fund the second stimulus budget will add to Japan’s debt burden, which is already the heaviest in the industrialized world.

The Bank of Japan separately unveiled a lending program on Friday to channel nearly $280 billion to small businesses and extended the deadline on measures implemented earlier this year to provide cash for struggling firms.

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