Japan’s Prime Minister Sanae Takaichi has asked her government to compile a supplementary budget to fund huge government subsidies for energy, after weeks betting that the Iran war would end before the cost of shielding consumers became too high.
Takaichi’s abrupt U-turn, which came in a meeting with coalition partners on Monday and followed repeated denials that an extra budget was necessary, triggered speculation that her government might fund the move by issuing new bonds, fuelling concern about Japan’s fiscal position.
The yield on the benchmark 10-year Japanese government bond rose slightly to 2.75 per cent on Monday. The yen weakened to about ¥159 versus the dollar, a level at which analysts said last week that authorities might intervene to support the currency.