Finance Minister Hirohisa Fujii said Tuesday the government will issue a record ¥53.5 trillion in debt this fiscal year, causing bond sales to exceed tax revenue for the first time in 63 years.
"Japan's fiscal situation is very severe," Fujii said at a news conference. "We will do whatever it takes" to contain bond sales from the next year, he said.
Tax revenue for the current year will slump to ¥36.9 trillion, less than the ¥46 trillion projected, he said.
Prime Minister Yukio Hatoyama on Tuesday released a ¥7.2 trillion economic stimulus package to speed recovery from the recession. The government's ability to spur growth is limited as the Organization for Economic Cooperation and Development forecasts the nation's debt burden will swell to twice the size of gross domestic product in 2010.
"What we should worry about is next year," said Junko Nishioka, chief economist at RBS Securities Japan Ltd. "Concern about bond sales will linger for a while given that it's pretty much impossible to expect an explosive recovery in corporate tax revenues."
The yield on 30-year bonds rose after Fujii's remarks, advancing three basis points to 2.225 percent.
The previous administration, voted out in August, forecast bond sales would reach ¥44 trillion for the year ending in March. The government will aim to cap bond sales below the initial estimate next year, Fujii said.
"We could lose the trust of the bond market if debt is sold in a careless way," Fujii said. "We will do our best" to avoid that situation.
Asked whether the government will stick with the target to contain bond sales below ¥44 trillion, Chief Cabinet Secretary Hirofumi Hirano on Tuesday said, "Including that point, we have to closely watch developments."
