Japanese PM Shinzo Abe wants the Bank of Japan to set a 2 percent inflation target
Japan has approved an extra budget that includes issuing $87.8 billion more debt to help pay for a massive stimulus package aimed at breathing life into the world's third largest economy
.The 7.8 trillion yen bond sale is part of a wider $226.5 billion stimulus package, partly financed by local governments and the private sector.
It has stoked fears about spending by Tokyo, which already owes creditors cash equal to twice the size of its economy.
The debt-financing package announced Tuesday includes 2.6 trillion yen in bonds specifically to cover gaps in the national pension scheme. The rest of the debt will pay for the national government's share of the stimulus.
The total extra budget amounts to 13.1 trillion yen.
The new government led by Shinzo Abe, which swept to power last month, has pledged to fix the long-ailing economy with big spending and pressure on the central bank to launch aggressive easing measures.
Abe, who has tangled with Bank of Japan governor Masaaki Shirakawa on policy, said he wants the BoJ to set a two percent inflation target to drag Japan out of the deflation that has haunted its economy for years.
The yen has tumbled to multi-year lows against the dollar and euro while equity markets have soared on the speculation about monetary easing and hopes Abe's government will succeed where other administrations have failed.
"We're giving our top priority to such issues as the strong yen and ways to get out of deflation," Chief Cabinet Secretary Yoshihide Suga, the government's top spokesman, told reporters after the budget was approved.
"But in the process, we intend to always bear in mind fiscal discipline when we issue government bonds... fiscal discipline is extremely important."
With the latest bond offering, Tokyo will have sold about 52 trillion yen in debt to finance its spending in the fiscal year through March, well above a 44 trillion yen cap set by the ousted Democratic Party of Japan, according to Dow Jones Newswires.
On Friday Tokyo said the $226.5 billion stimulus plan was aimed at creating hundreds of thousands of jobs, rebuilding areas stricken by the 2011 quake-tsunami disaster and strengthening the military.
Economists have been divided, with some saying the stimulus was the right medicine for Japan's moribund economy, while detractors said it would have a short-lived impact and leave the country saddled with more debt.