Japan Plans to Increase Bond Interest Rate to 3.8% for Fiscal 2027

The Japanese Finance Ministry is poised to raise the assumed interest rate on long-term government bonds to 3.8% in its fiscal 2027 budget proposal, according to sources.

This marks a notable increase from the 3% rate set in the fiscal 2026 budget, driven by rising long-term interest rates and escalating debt-servicing costs. The adjustment reflects a strategy to mitigate potential spikes in rates, with the assumed rate typically calculated by adding about 1.1 percentage points to current levels.

In fiscal 2026, ¥31.28 trillion was allocated for debt servicing, and projections indicate that requests from government agencies could surpass ¥122.4 trillion for the fourth consecutive year. Recent trends, including a 30-year high of 2.945% for Japan's 10-year government bond yield, are attributed to concerns over the fiscal policies under Prime Minister Sanae Takaichi and global inflationary pressures.

Source: www.japantimes.co.jp