PM Announces Supplementary Budget and Market Implications

PM Sanae Takaichi announced a JPY3 trillion+ supplementary budget for FY2026, which Mizuho views as market-neutral for JGB supply due to offsetting issuance reductions. Rising yields are seen as driven by geopolitical tensions and inflation rather than this specific fiscal expansion.

Key Takeaways

• 1.Prime Minister Sanae Takaichi announced a FY2026 supplementary budget exceeding JPY3 trillion, primarily for energy subsidies and Middle East reserves.
• 2.The budget will be funded by deficit-financing bonds, but net JGB market issuance for the year is expected to remain unchanged due to offsetting reductions in planned FY2025 issuance.
• 3.Rising JGB yields are attributed more to Middle East tensions and global inflation concerns than the specific supplementary budget announcement.

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• Macro Information
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