By Makiko Yamazaki and Yoshifumi Takemoto
TOKYO (Reuters) -Japanese Finance Minister Katsunobu Kato said on Tuesday that the government will closely monitor the bond market ahead of the auction of super-long debt this week, warning that higher interest rates could put pressure on state finances.
“Rising interest rates could increase interest payments (on government debt) and pressure state finances for policies,” Kato said at a press conference.
“We’ll carry out appropriate government debt management while closely monitoring the market developments and continuing dialogue with investors,” he added.
Long-dated debt has been sold off around the world in recent weeks, and in Japan, concerns have been exacerbated by a decrease in bond buying by the central bank and political jockeying over stimulus.
All eyes will be on the sale of 40-year bonds, Japan’s longest tenor, on Wednesday.
The Japanese government said on Tuesday that it would use 388 billion yen ($2.72 billion) from a reserve fund to finance an emergency economic package to alleviate any impact on industries and households from new U.S. import tariffs.
The package includes support for corporate financing as well as subsidies to lower gasoline prices and partially cover electricity bills.
While the government is considering compiling additional stimulus measures ahead of an upper house election in July, a senior lawmaker from the ruling Liberal Democratic Party said it agreed with its junior coalition partner Komeito that fresh issuance of deficit-financing bonds should be avoided.
Asked about a report that SoftBank Group Chief Executive Masayoshi Son is proposing to establish a Japan-U.S. sovereign wealth fund, Kato said at the news conference that the government, at least at the finance ministry, was not aware of the specifics of such a plan.
The Financial Times reported on Sunday that Son was floating the idea of creating a joint sovereign fund to make technology and other investments across the United States.
($1 = 142.3900 yen)
(Reporting by Makiko Yamazaki and Yoshifumi Takemoto; Editing by Christopher Cushing and Kate Mayberry)
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