By Theresa Barraclough Oct. 16 (Bloomberg) -- Japan's government notes advanced for a second day after today's sale of 1.9 trillion yen ($19 billion) in five-year debt attracted more bids than the average of the previous two auctions. The Ministry of Finance sale drew bids worth 3.04 times the amount on offer, compared with an average ratio of 2.93 at the August and September sales. Demand for debt increased as concerns of a global recession weighed on stocks, causing the Nikkei 225 Stock Average to drop by the most since 1987. Japanese Prime Minister Taro Aso said a $250 billion U.S. bank bailout plan is ``insufficient.'' ``We see the fundamentals continuing to support the JGB market,'' said Naomi Hasegawa, a senior bond strategist at Mitsubishi UFJ Securities Co., a unit of Japan's largest bank by assets, in Tokyo. The auction ``was better than expected.'' The yield on the 1.1 percent bond due September 2013 fell 2 basis points to 1.14 percent at 4:48 p.m. in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price rose 0.093 yen to 99.813 yen. Ten-year yields were little changed at 1.59 percent. Ten-year bond futures for December delivery gained 0.11 to 135.91 as of the afternoon close in Tokyo and the Nikkei 225 plunged 11.4 percent, its second-biggest drop ever. A basis point is 0.01 percentage point. `Insufficient' Plan ``People think the $250 billion plan is insufficient and that's why markets are falling,'' Prime Minister Aso told lawmakers in parliament in Tokyo today. Aso, who made similar remarks yesterday, said the lesson from Japan's bank bailout 10 years ago was that time is of essence. Japan pumped 12.4 trillion yen into its banks between 1998 and 2003 to help clear bad loans built up during the bubble economy. More than 9 trillion yen has already been repaid with the government generating a return in excess of 10 percent. ``Even though we have big announcements on bank bailouts, we are still waiting on the details and actual implementation,'' said Guthrie Williamson, portfolio manager in Sydney at Principal Global Investors, which manages $244.9 billion in assets globally. ``I remain bullish on government bonds because growth is slowing and interest rates will remain lower.'' The gain in bonds was limited by speculation the government will issue additional debt to help finance an economic fiscal package. Fiscal Premium ``Concerns of extra government notes are deeply rooted,'' said Kazuhiko Sano, chief strategist in Tokyo at Nikko Citigroup Ltd., a Japanese unit of the world's biggest bank by assets. ``Some investors may price in a fiscal premium and the market may turn bearish.'' Aso's administration may announce a second economic-stimulus package Oct. 24 and then dissolve the lower house before it's approved, the Yomiuri newspaper reported yesterday, citing ruling-party officials it didn't name. Japan's lower house last week approved a 1.8 trillion yen stimulus package. Debt sales to finance the plan may lead to a ``steepening'' of the yield curve, Nikko Citigroup's Sano said. The curve is a graph that plots the yields of bonds with different maturities. The difference in yields between two- and 20-year debt widened to 1.32 percentage points today, compared with a more than five-year low of 1.15 percentage points reached Oct. 10, according to data compiled by Bloomberg. ``The effects of the financial crisis has spilled out into the real economy, increasing deflation speculation,'' said Eiji Dohke, chief strategist at UBS Securities Japan Ltd. in Tokyo. To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.

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