Ishiba instructs LDP executive to include cash handout in election pledge

Prime Minister Shigeru Ishiba said on Friday he had instructed the Liberal Democratic Party's executive to include cash handouts as part of its election campaign pledge to aid households coping with inflation.
The handout would be ¥20,000 ($139) per person and an additional ¥20,000 would be added on top of that per child or low-income earner, Ishiba said.
The handout plan could add to concerns over the government's already tattered finances, as lawmakers seek to appease voters ahead of an Upper House election slated for July.

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The BOJ still has a massive footprint in Japan's bond market, with ownership of around half the nation's outstanding central government debt and would still be buying around ¥2.1 trillion of bonds per month in early 2027 under its new plan. Still, the void created by the smaller BOJ purchases is ruffling bond market dynamics as it hasn't been filled by renewed buying from private-sector banks and life insurers. That gap has fueled much of the choppy downward pressure on bond prices and pushed up yields. The problems are particularly acute in the superlong end of the market due partly to separate changes to regulations that have limited the appeal of those bonds for banks while reducing the need for life insurers to buy them. Growing concerns over Japan's fiscal trajectory and expanding deficits globally including in the U.S. are also feeding into reluctance to pick up debt of 20 years or more. 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On buybacks, the official said that some market participants had asked for purchases of superlong bonds while others said buybacks would hurt the autonomy of the market. The ministry isn't working on implementing buybacks for now, and it's not something that can be implemented soon. Even if the planned adjustments go ahead, the Finance Ministry will still face the challenge of finding alternative investors to absorb the slack as the central bank continues its tapering. Japan remains heavily reliant on bond issuance to finance spending. Japan's projected debt-to-gross domestic product ratio of 232.7% this year is still the highest among developed economies, feeding into concerns about the nation's fiscal stability. About a quarter of the initial budget for fiscal 2025 was allocated to debt-servicing costs alone, underscoring the country's vulnerability to rising yields. The concerns have been fanned by policy measures floated by political parties ahead of a national election in July. Parties are preparing to unveil costly proposals aimed at securing voter support. The ruling Liberal Democratic Party is planning yet another round of cash handouts to households. The Democratic Party for the People, a key opposition force, has called for cutting the national sales tax to 5% across the board, a more expensive choice, with additional bond issuance floated as a possible funding source. Against this backdrop, investors are in need of reassurance that the balance of supply and demand in the JGB market will be restored without yields rocketing.