Japan's Debt-Servicing Costs Set to Soar 17% to Record High

Japan's finance ministry is projecting a record-high debt-servicing cost of 36.64 trillion yen ($230 billion) in the next fiscal year, representing a 17% increase from the current year.

The assumption behind this projection is an interest rate of 3.8%, which is a 29-year high. This move is part of Prime Minister Sanae Takaichi's push for a more expansionary fiscal policy.

The total value of budget requests from government ministries and agencies for fiscal 2027 is expected to exceed 130 trillion yen, up sharply from the current fiscal year's approximately 122 trillion yen. This surge is largely driven by the Prime Minister's public investment scheme that allows ministries to seek funding without a preset cap.

The government also plans to incorporate into the initial budget spending that was previously financed through supplementary budgets, which could further inflate headline expenditure.