Japan plans an 18.6 trillion yen ($181 billion) package to counter the impact of a sales-tax bump in April, as Prime Minister Shinzo Abe tries to sustain a recovery in the world’s third-biggest economy.
Japan’s bonds may fall, pushing 10- year yields to the highest since May, on speculation the ruling party will increase debt sales to help pay for economic-stimulus measures, according to Mizuho Securities Co.
The Bank of Japan’s direct debt purchases from the government may be capped in the next financial year at about the current level, bucking forecasts for an increase of as much as 18 trillion yen ($185 billion).
The Bank of Japan, struggling to keep the strengthening yen from derailing efforts to repair the world’s third-largest economy, is facing a new challenge -- the shrinking yield gap between two-year sovereigns and Treasuries.
Yasunari Ueno , chief market economist at Mizuho Securities Co. in Tokyo, comments after Japanese Prime Minister Naoto Kan survived a parliamentary no-confidence vote by offering to resign once the country’s March 11 earthquake crisis is under control.