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(Bloomberg) — Japan’s Finance Minister Satsuki Katayama indicated she will take into account the bond market as the government considers how to fund new spending to address the adverse impacts of Middle East conflict on the economy.
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“Given the situation in the Middle East, we must be fully prepared from the standpoint of minimizing risks,” Katayama told reporters Monday in Paris after attending a meeting of Group of Seven finance ministers. “Minimizing risks also involves the markets. The overall financial markets are themselves one of the risks.”
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The remarks follow Prime Minister Sanae Takaichi’s 180-degree turnaround Monday toward compiling an extra budget, helping send super long bond yields to a fresh record high. Katayama gave little for traders searching for clear hints for the scale of new spending and how it will be funded in the nation with the world’s largest public debt burden among developed countries.
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“In a sense, the Prime Minister’s directive is for us to comprehensively assess the situation and consider measures to secure funding, and that is what we intend to do,” Katayama said without answering a question on whether the government will need to issue new government bonds.
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Takaichi wants to reinstate energy subsidies this summer and ensure lower household energy bills than last year’s. The likely supplementary budget is expected to fund emergency relief measures rather than provide economic stimulus, Bloomberg News reported earlier.
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Japan’s 30-year government bond yield jumped Monday, touching its highest level since the bond was first introduced in 1999. The yields for a benchmark 10-year bonds and 20-year note also spiked, reaching the highest level since 1996.
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“Investor fears are pretty deep-rooted,” said Kazuhiro Sasaki, head of research at Phillip Securities Japan. “There are worries that the fiscal situation could deteriorate if the government issues a supplementary budget.”
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