The government could also sell additional bonds until a decision is made on whether to raise taxes as a long-term source of funding for the scheduled spending increase, Kyodo said without citing sources.
“A temporary boost to borrowing cannot be helped. Tapping the forex account would be well-timed given the marginal gain Japan has reaped from a weak yen,” said Koya Miyamae, a SMBC Nikko Securities analyst. “What’s important is for Japan to present a plan on debt repayment through tax hikes and spending cuts.”
The proposal highlighted the government’s struggle to scrape together defence funding while dealing with the industrial world’s heaviest debt burden, more than twice the size of Japan’s economy. Opposition from within the ruling bloc against tax increases has clouded the prospects for more defense spending, leaving more debt issuance and cuts in other spending as the two other leading options.
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