South Korea is forecast to sell an unprecedented amount of debt to fund stimulus as policymakers liken the economy’s current situation to that faced by neighboring Japan at the start of a two-decade slump.

Finance Minister Choi Kyung-hwan unveiled a plan last week to boost spending by 11.7 trillion won ($11 billion) in the second half by freeing up cash from state-run programs and said the 2015 budget will be “as expansionary as possible.” That means next year’s government borrowing, proposals for which will be submitted to parliament in September, will surpass the record 97.5 trillion won of bond sales planned in 2014, according to analysts at six primary dealers surveyed by Bloomberg News.

“It’s highly likely next year’s issuance will jump by more than the fiscal stimulus planned for the second half of this year,” Shin Hong-sup, a Seoul-based fixed-income analyst at Samsung Securities, said in a July 24 phone interview. “This suggests an increase of about 1 trillion won in monthly sales, which can’t be favorable for bonds.”

South Korea’s economy, beset by a slump in growth amid low inflation and a record current-account surplus, risks following Japan’s so-called “lost 20 years” during the 1991-2010 period, the finance ministry said in a July 24 statement. The three-year bond yield, which reached a 14-month low of 2.46 percent last week on bets the central bank will cut interest rates, will rise to 2.7 percent by end-December and 2.8 percent in the second quarter of 2015, according to the median forecasts of analysts surveyed by Bloomberg.

The finance ministry estimated in December that sovereign debt sales would rise by 9 trillion won this year, following a similar increase in 2013 and a 1.6 trillion won decline in 2012. Issuance jumped 33 trillion won in 2009 as the government stepped up spending to aid a recovery from the global financial crisis. South Korea’s economy expanded 0.6 percent in the second quarter from the previous three months, the slowest pace in more than a year, central bank data show.

President Park Geun-hye said on July 24 that South Korea risks falling into a “long tunnel” of depression unless there is a revival in the domestic economy.

The finance ministry’s stimulus plan, released the same day, included tax incentives to boost corporate investment. (Bloomberg)