Japan’s finance ministry expects the country’s debt-servicing costs to rise 17.1% to a record ¥36.6386 trillion (US$229.94 billion) in the next fiscal year starting in April, Kyodo News reported on Tuesday.
The increase is being driven by higher interest rates as borrowing costs rise, adding further pressure to Japan’s already stretched public finances.
The ministry is considering raising the assumed interest rate used to calculate debt-servicing costs to 3.8% for the next fiscal year’s budget request, from 3.0% in the current fiscal year. That would be the highest assumption in 29 years.
Japan’s rising borrowing costs have become a growing concern as the 10-year government bond yield recently approached 3%, its highest level since the mid-1990s.
Higher yields could push debt-financing costs beyond the government’s current estimates and constrain spending on Prime Minister Sanae Takaichi’s growth initiatives.
At ¥36.64 trillion, the projected debt-servicing bill would represent a significant increase from the ¥31 trillion currently set aside for such costs.
