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Japan government to raise long-term rate estimate to 2.1% in FY2025/2026, Nikkei reports

Japan government to raise long-term rate estimate to 2.1% in FY2025/2026, Nikkei reports

Japanese national flag waves at the Bank of Japan building in Tokyo, Japan, on Mar 18, 2024. (Photo: REUTERS/Kim Kyung-Hoon)

TOKYO: Japan's government plans to raise its long-term interest rate estimate used to compile the state budget to 2.1 per cent for the next fiscal year from the current year's 1.9 per cent, the Nikkei business daily reported late on Monday (Aug 19).

The plan reflects rising government bond yields as the Bank of Japan raised interest rates in a shift away from a decade-long stimulus programme, the Nikkei said.

As a result, debt-servicing costs are estimated to increase to ÂĄ28.9 trillion (US$197.16 billion) for the year starting in April next year, up sharply from ÂĄ27 trillion for the current year, according to the Nikkei.

The overall proposed budget is likely to exceed ÂĄ110 trillion for the fourth consecutive year, it added.

The interest rate estimate is automatically calculated, taking into account the underlying bond yield plus a precautionary 110 basis points in case interest rates spike.

The estimated rate for the next fiscal year will be finalised in the budget compilation in December.

Source: Reuters/ec

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