Prime Minister Takaichi's proposed 14-year investment programme — ¥370 trillion
(~$2.3tn) through March 2041 — has prompted bond strategists to warn of renewed
pressure on the Japanese government bond market and questions over financing and
the plan's ability to deliver growth. The government has not specified
incremental fiscal outlays; several brokers say expanded borrowing would likely
lift long-term yields. Masayuki Koguchi, executive fund manager at Mitsubishi
UFJ Asset Management, said investors will focus on financing and that the plan
will most likely be funded via government bond issuance or other measures, a
result that could make JGBs difficult to buy. Daiwa Securities chief strategist
Shun Otani said the plan will have a negative effect on JGBs, noting the
government's assumption of roughly ¥10 trillion a year in fiscal spending and
the issuance of transitional bonds, and added market uncertainty over whether
the investments will produce the expected growth will push up risk premia.
