By Takaya Yamaguchi

TOKYO (Reuters – Japan plans to create an extra budget in fiscal 2021, with spending totalling $313 billion. A draft of Reuters’s document showed that Japan was preparing a budget. However, the market issuance of interest bearing bonds is steady. This is to help ease the effects of the coronavirus epidemic.

The draft revealed that tax revenue will surpass initial estimates by 6.4 trillionyen and reach a record 63.8 trillionyen. This is a clear sign that the third-largest economy in the world has overcome the COVID-19 epidemic better than previously thought.

As Prime Minister Fumio Kishhida announced last week the package of 79 trillion yen (686 billion), which includes a record spending amount of 55.7 trillion, an extra budget plan was prepared.

The total number of new bonds issued for fiscal year 2015 was 65.7 trillion.

According to sources familiar with the matter, the Ministry of Finance intends to continue market issuance of interest bearing government bonds (JGB), as it revises its issuance plan in this fiscal year.

In order to prevent a sharp review of the market issuance JGBs, the ministry is cutting back on fiscal investment and loan program (FILP), agency bonds in an effort to offset any rises in market issuances of interest bearing JGBs.

The record-breaking 221.4 trillionyen market issuance will not be surpassed by the 138.2 billion yen interest-bearing bond issuances for fiscal 2022.

Interest-bearing JGBs can be of any maturity: 2 years to 5 years or 10 years; 20 years to 30 years; 40 years. Inflation-linked bonds as well as those for enhanced liquidity are also available. Sources spoke on condition that they remain anonymous because they cannot speak publicly.

The remaining treasury bill amounts can be used for adjustment of excesses or deficiencies, depending on whether the Supplementary Budget is available. Revisions may result in the revocation of some treasury bills.

    Three rounds of heavy government stimulus last year have pushed the outstanding balance of long-term debt to 1,212 trillion yen this fiscal year, or 219% of the size of Japan’s $5 trillion economy, which is the worst among industrial economies.

The government’s current fiscal year has seen a record-breaking budget of 106.6 trillion Japanese yen. New borrowing is estimated at 43.6 trillion.

($1 = 115.0000 yen)