The value of government bonds issued to cover the fiscal 2006 budget deficit is expected to hit 45.5 trillion yen, 25 percent higher than the planned issuance for the 2003 budget, according to a report released Wednesday by the Finance Ministry.

The bleak estimate -- based on the assumption that there will be zero nominal growth for the next four years -- is worse than the downwardly revised economic outlook released last month by the Council on Economic and Fiscal Policy, which is chaired by Prime Minister Junichiro Koizumi.

The ministry's government spending and revenue forecasts suggest that 49.4 percent of state revenues in fiscal 2006 will come from bond issues, against 44.6 percent for 2003.

The report also included a slightly brighter outlook that reflects nominal growth figures of 0.5 percent in fiscal 2004, 1.5 percent in 2005 and 2.5 percent in 2006. Even under this scenario, the estimated value of government bonds issued in fiscal 2006 would reach 42.9 trillion yen, 17.9 percent higher than in fiscal 2003, the report said.

Ministry officials said the severer outlook is mainly based on smaller-than-expected reductions in costs related to public works projects and social security -- including medical care, pension management and nursing care.