Exclusive-Japan's extra budget to include funding from fresh debt, source says

TOKYO - Japan's government will likely issue fresh debt as part of funding for a planned extra budget to cushion the economic blow from the Middle East war, a government source with direct knowledge of the deliberation told Reuters on Monday.

Any additional debt issuance would further strain Japan's already worsening finances and may accelerate rises in long-term interest rates.

Japanese Prime Minister Sanae Takaichi is planning to instruct the government to consider formulating a supplementary budget on Monday although the size of such a package was yet to be decided, the source said.

The yield on the benchmark 10-year Japanese government bond (JGB) rose 10 basis points to 2.8% on Monday, marking the highest level since October 1996.

Sources told Reuters last week that the government was looking to compile a supplementary budget to ease household energy costs.

(Reporting by Tamiyuki Kihara, Writing by Leika Kihara and Anton Bridge; Editing by Shri Navaratnam and Sam Holmes)

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This story was originally published May 17, 2026 at 7:04 PM.