Japan Cabinet Secretary KIHARA said on Thursday Japan plans to use transition
bonds to finance Sanae Takaichi's investment plan. KIHARA said, "Japan has in
the past used transition bonds backed by future revenues to implement multi-year
budget measures." He added that a similar mechanism had previously been used to
fund corporate green-technology transitions and said the government will
"further expand such measures and push for a stronger economy." Transition bonds
are intended to fill temporary funding gaps on the premise of future-secured
revenue streams; the Finance Ministry classifies them separately from
deficit-covering bonds. The proposal comes as Japanese bond-market concern over
the fiscal outlook continues to mount. Earlier this month, 10-year JGB yields
rose to their highest level since 1996 amid market worries that a Takaichi
government would favor an expansionary fiscal stance. The transition-bond plan
appears aimed at avoiding further market concern over large-scale issuance of
deficit-financing bonds, but market doubts about its repayment scheme could
still pressure the bond market.
