Funding Supplementary Budget and FY2025 JGB Issuance Reduction

Mizuho analyzes the potential for funding Japan's FY2026 supplementary budget via settlement surpluses and reduced FY2025 JGB issuance to stabilize the market.

Key Takeaways

• 1.The Japanese government is considering a JPY3 trillion FY2026 supplementary budget, potentially funded by settlement surpluses and JGB issuance reductions to minimize market impact.
• 2.Legal restrictions under the Finance Act require at least half of any settlement surplus to be used for debt redemption, which may limit its availability for direct budget funding.
• 3.The immediate impact on JGB supply/demand may be limited if the budget is funded by drawing down frontloaded refunding bonds.

Table of Contents

• Possibility of funding supplementary budget with settlement surplus and potential reduction in FY2025 JGB issuance
• Examining implications of reducing FY2025 issuance of deficit-financing bonds
• Examining implications for bond market
• Important Disclosure Information
• Analyst Certification
• Disclaimer

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